This morning's Brussels bomb attacks have led to risk-off sentiment across European asset classes, with Bunds higher and equities firmly in the red, although if the Paris terrorist attacks of November are any indication, today's tragic events may be just the catalyst the S&P500 needs to surge back to all time highs. FX markets have also been dominated by events in Brussels, with USD and JPY strengthening, while EUR and GBP softening throughout the European morning.
Losses today would disrupt a five-week rally bolstered by improving economic data, rising crude prices and "optimism that central banks around the world will continue to support growth" as Bloomberg puts it clearly not aware of the irony that the world is no longer able to grow precisely due to decades of central bank "stimulus."
This is where global markets stand as of this morning.
- S&P 500 futures down 0.4% to 2034
- Stoxx 600 down 0.9% to 338
- FTSE 100 down 0.6% to 6149
- DAX down 0.9% to 9854
- German 10Yr yield down 3bps to 0.2%
- Italian 10Yr yield down less than 1bp to 1.25%
- Spanish 10Yr yield up 2bps to 1.46%
- S&P GSCI Index down less than 0.1% to 336
- MSCI Asia Pacific up 0.7% to 130
- Nikkei 225 up 1.9% to 17049
- Hang Seng down less than 0.1% to 20667
- Shanghai Composite down 0.6% to 2999
- S&P/ASX 200 down 0.3% to 5167
Global top news
- Brussels Rocked by Deadly Attacks With Blasts at Airport, Subway: Two explosions ripped through Brussels airport departure hall, third hit a downtown subway station on Tuesday morning; VTM news put toll at 11, citing local fire department.
- IPhone Hearing Canceled as FBI Tests Hack Without Apple Help: Court hearing was canceled at DoJ’s request, as govt said in Monday court filing that it wanted to test a possible method for accessing phone data.
- Apple Unveils Smaller IPhone SE, New IPad Pro to Aid Sales: iPhone SE has a 4-inch-screen, incorporates faster A9 processor that also runs larger iPhone 6S handsets.
- Cooperman, Omega Said to Get Wells Notice Over 2010 Trade: Leon Cooperman said regulators are considering taking action against both him, Omega Advisors over certain trades, according to person familiar.
- Express Scripts Incoming CEO Wants Anthem to Stay Amid Suit: Incoming CEO Tim Wentworth trying to keep its biggest customer, after health insurer Anthem sued to recoup billions.
- Carnival Wins Cuban Government’s OK to Begin Cruises to Island: Decision allows co.’s Fathom division to become first U.S. cruise line to dock there in >50 years.
- Ackman Said to Address Valeant Side-by-Side With Pearson: Ackman, with chairman Ingram, outgoing CEO Pearson answered questions, made proclamations about co.’s future.
- BlackRock Says There Won’t Be a U.S. Recession, Cut Treasuries: “Economic indicators this week may show the U.S. economy experienced a mild slowdown but is not headed for a recession,” Richard Turnill, global chief investment strategist, wrote in a report Monday.
- Boeing Likely to Miss Delivery Date for Tankers: Pentagon: Co. likely to miss first major requirement of its $51b tanker program for U.S. Air Force; delivering firrt 18 aerial refueling planes by August 2017.
- Apache Unlikely to Seek M&A Until More Restructuring Occurs: Co. has higher bar for purchasing assets, given that it already has deferred activity, CEO John Christmann said Monday.?Transocean, Schlumberger See Oil Industry Recovery Delayed ?National Oilwell Considering Billion-Dollar Deals in Oil Slump
Looking at regional markets, Asian stocks traded mixed despite the mild positive lead from Wall St., as commodities retreated and demand for risky assets remained subdued ahead of the Easter season. Nikkei 225 (+1.9%) outperformed on return from a long weekend to snap a 4-day losing streak with JPY weakness driving price-action, while ASX 200 (-0.3%) saw indecisive trade as losses in financials and materials capped upside momentum. Elsewhere, Chinese markets were subdued with the Shanghai Comp (-0.6%) on course for its first loss in 8 days following weakness in commodity-related sectors, while there were also reports that China's regulator urged banks to reduce their risk and curb dividend pay-outs. Finally, 10r JGBs traded relatively flat despite the heightened risk-appetite in Japan as real money accounts were seen to be mostly side-lined, while there was also notable curve-flattening as yields in the super-long-end dropped to fresh record lows. BoJ's Nakaso said would like to watch for some time to evaluate how negative rates work throughout the Japanese economy and added that it is technically possible for the BOJ to go deeper into negative territory.
Top Asian News
- Hong Kong Property Crash Averted, If Stock Traders Are Right: Hang Seng Properties Index has climbed 18% from January low.
- Ringgit Gains to Seven-Month High on 1MDB Asset Sale Report, Oil: Currency’s break of 4/$ puts 3.9 in sight, Macquarie says.
- China’s Rising Sway Seen in Korea Bonds as Holdings Top U.S.: Chinese funds are now biggest holder of won- denominated debt.
- Botched Rules Trip Modi Dream of Shipping Hub Rivaling Singapore: Curbs, costs mean shippers prefer Colombo, Singapore, Dubai.
- ANZ Bank Plans to Eliminate 12 Positions in its Markets Division: Unit includes foreign exchange, syndicated loans, fixed income.
The price action in Europe has been dictated by the tragic events in Belgium, in which explosions at the Brussels airport and metro stations has prompted risk off sentiment. As such, equities (Eurostoxx -0.40%) are deeply entrenched in negative territory with underperformance seen in airline names such as IAG (-4.2%) and Ryanair (-4.3%), this comes alongside other tourist related names feeling the brunt such as Accor (-4.4%). The risk off tone has seen Bunds move higher with volume also spiking, while yields continue to bull flatten across the curve with peripheral spreads slightly wider.
Top European News
- European Hotel Stocks Fall After Explosions at Brussels Airport: Bloomberg Europe Lodging Index, composed of seven leading lodging stocks, fell 4.1%, most since Feb. 11.?Air, Train Travel Slows in Europe After Brussels Airport Blasts
- Bank Drops as Moody’s Signals Risk of Cut Amid Overhaul: “Since changing leadership last June and recalibrating its strategic plan last November, the operating environment has worsened for Deutsche Bank,” ratings firm said in statement late Monday.
- German Business Confidence Rebounds on Resilient Domestic Demand: Indicator improved for the first time in four months.
- Wal-Mart Loses Everyday Low Price Edge as Aldi Opens Across U.S.: Family-owned German grocery-store chain is beating WMT at its own game: selling food at rock-bottom prices.
- Bang & Olufsen in Takeover Talks With China’s Sparkle Roll: Several elements in the discussions remain to be resolved, B&O said Tuesday in statement.
- OMV Said in Talks to Hire Morgan Stanley for Turkey Disposal: Sale may raise as little as $1.3b, according to Bloomberg Intelligence calculations.
In FX, this morning's FX trade has also been dominated by the confirmed suicide attacks on Belgium. All the familiar risk currencies were hit, with spot and cross JPY taking a dive; the USD rate falling to lows around 111.36 having pushed through to 112.20 highs prior to this. GBP/JPY was a key loser on the day, as Cable was hit hard prior to news of the above — pre 1.4400 pounced up as London players came in. EUR/GBP was also edging higher, but with EUR/USD also coming under fire, the USD won out against all currencies with the exception of the JPY. AUD and CAD were slow to react, and were only marginally weakened in the risk off climate — as was NZD. The CHF made some progress against the EUR, less so against the USD. Limited impact on emerging FX. German Ifo (106.7 vs. Exp. 106) beat expectations on all counts although with ZEW (4.3 vs. Exp. 5.4) lower and UK inflation (Y/Y 0.30% vs. Exp. 0.40%) was softer than forecast.
In commodities, gold has seen the biggest move in commodities, rising USD 9.00/oz after the terror attacks in Brussels, meanwhile WTI and Brent are trading relatively flat for the day. In Base metals, copper and iron ore prices declined amid weak sentiment in China, with Dalian iron ore futures further pressured by profit-taking after prices hit limit-up in the prior 2 consecutive days.
On the US calendar today, markets will focus on the latest Markit manufacturing flash PMI for March (51.9 expected; 51.3 prior) and the Richmond Fed Manufacturing index (0.0 expected; -4 prior). We also get more housing data with the FHFA house price index for January due (+0.5% expected) ahead of the manufacturing data as well as API Crude Oil Inventories data.
Bulletin Headline Summary From Bloomberg
- Treasuries slightly higher in overnight trading, global equity markets drop, gold rises; Brussels airport and subway system hit by explosions in possible terrorist attacks.
- The pound suffered the biggest impact in the currency market of the Brussels explosions amid speculation the tragedy boosts the case of campaigners who want Britain to quit the European Union
- The U.K.’s inflation rate was unexpectedly unchanged in February, remaining far below the BOE’s 2% goal. Annual consumer-price growth was at 0.3%; economists had forecast an acceleration to 0.4%
- Deutsche Bank extended declines after Moody’s Investors Service signaled it may cut the German lender’s credit rating amid concern that it will struggle to restructure businesses
- German business confidence improved for the first time in four months in a sign that domestic demand is helping shield companies in Europe’s largest economy from slowing global growth
- The Australian central bank’s attempts to talk the local currency lower last year ran afoul of the U.S. Treasury, which chided officials by reminding them of their commitment to a freely floating exchange rate
- Prime Minister Justin Trudeau will put the Canadian government back in business when he introduces a debut budget Tuesday that reverses a decade of restraint
- In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones
- $2.7b IG corporates priced yesterday; MTD $132.505b, YTD $426.755b; $1.75b HY priced yesterday, MTD 17 deals for $9.965b, YTD 42 deals for $24.82b
- Sovereign 10Y bond yields mostly steady; European, Asian equity markets lower; U.S. equity-index futures drop. WTI crude oil and copper fall, gold rallies
US Event Calendar
- 9:00am: FHFA House Price Index m/m, Jan., est. 0.5% (prior 0.4%)
- 9:45am: Markit US Manufacturing PMI, March P, est. 51.9 (prior 51.3)
- 10:00am: Richmond Fed Mfg Index, March., est. 0 (prior -4)
- 11:30am: U.S. to sell $55b 4W bills
- 12:30pm: Fed’s Evans speaks in Chicago
- 7:00pm: Fed’s Harker speaks in New York