Stoxx 600

One day after the biggest jump in stocks in two months on what has still been an undetermined catalyst, overnight global equities did a U-turn with European stocks falling toward a one-month low and U.S. stock index futures declining, as crude oil dropped toward $44 a barrel. A driver the move lower was a sharp reversal in the USDJPY which dropped 100 pips from yesterday's highs which took places just as Goldman predicted the USDJPY has finally bottomed, facilitated by a weaker dollar (also following a Goldman report yesterday forecasting the USD was about to surge).

In what has been an approximate repeat of the Monday overnight session, global stocks and US futures rose around the world as oil prices climbed toward $44 a barrel, with risk-sentiment pushed higher by another plunge in the Yen which has now soared 300 pips since the Friday post-payroll kneejerk reaction, and was trading above 109.20 this morning.

The overnight session has been one of alternative weakness and strength: it started in China where stocks tumbled 2.8% to a two month low following an unexpected warning in the official People's Daily mouthpiece that debt and NPLs are too high, not to expect more easing will come, and that the Chinese Economy’s performance won’t be U- or V-shaped but L-shaped.

Ahead of the most important macroeconomic event of the week, US nonfarm payrolls (Exp. +200,000, down from 215,000 and following a very poor ADP report two days ago), the markets have that sinking feeling again.

While markets remain relatively subdued ahead of tomorrow's nonfarm payrolls report, after several days of losses in US stocks, which have taken "sell in May" to heart and pushed the S&P500 to three week lows, overnight markets ignored the latest weak data out of China where the Caixin Services PMI was the latest indicator to disappoint (dropping from 52.2 to 51.8), and instead focused on crude, which rebounded from yesterday's post inventory-build lows and briefly printed above $45/bbl over uncertainty related to the impact of Canada wildfires on production and how long will last.