Late yesterday, after Nobel peace prize-winning president Obama revealed his latest military incursion, years of pent up can-kicking almost caught up with futures, which dared to tumble by a whopping 0.7%, a move which hit Europe far more than the US, and shortly after Europe’s open, the Euro Stoxx 50 Index dropped 10% from its 2014 high, marking an official correction in Europe where the Dax continues to be the key risk indicator, and which dropped as low as 8,903 before recovering to a drop of only 0.9% while German Bunds continues to print record highs day after day on fears what the escalating Russian trade war will do to the German economy, and other such “costs.”
US futures meanwhile have seen most of their losses recovered thanks to the usual relentless low volume USDJPY levitation which started just before Europe’s open, which pushed ES down to just -0.2% after a nearly four times greater drop. Still, while futures may be surging, the 10 Year has not gotten the memo and remains stuck just above 2.36% or its lowest print since June 2013, a clear indication that at least the bond market has given up all hope of a so-called US recovery for the conceivable future. What is most important however, is that at this pace, the Friday confidence effect, i.e., a green close, may be recovered: let’s all just wait and see what the NY Fed trading desk decides to do, and escalating world wars aside, let’s just pretend that HY didn’t just sugger the biggest weekly HY outflow in history didn’t just take place.
Bulletin Headline Summary from RanSquawk and Bloomberg
- S&P futures languish close to 3-month lows, below 1900, as Obama’s airstrike authorization prompts a flight to quality across the globe, pushing US 10yr yields to 14-month lows
- EUR trades above pre-ECB levels as short-covering and strong French Industrial Production lifts the single currencyÂ
- Chinese equities are spared from broader Asia-Pacific weakness by a record high trade surplus, as export growth doubled expectations, lifting the Shanghai Composite by 0.3% while the Nikkei 225 fell 2.6%
- Treasuries rally overnight, led by long-end, as President Obama orders airstrikes in Iraq and Israeli/Palestinian ceasefire breaks down; 10Y yield (2.36%) drops to its lowest since June 19, 2013.
- U.S. 10Y yield and U.K. 10Y yield both fall to their lowest levels in a year on flight to quality flows
- President Obama authorized air strikes against Sunni militants in Iraq, potentially reengaging the U.S. military in a conflict that he pledged to leave behind when he first won office
- Crude oil prices rose as President Obama authorized airstrikes in parts of Iraq, OPEC’s second-largest producer, while Chevron Corp. said it was withdrawing some workers
- Israeli aircraft pounded the Gaza Strip today after militants fired rockets into the country’s south, shattering    a cease-fire and reigniting the region’s monthlong conflict
- The worst Ebola outbreak on record is a public health emergency that threatens nations outside the four in West Africa where the virus is spreading, the World Health Organization said
- U.S. Secretary of State John Kerry met Afghanistan’s two presidential candidates in Kabul yesterday to lay out a road map to complete a vote audit and inaugurate a new leader by the end of the month
- Investors pulled a record $7.1 billion from high-yield bond funds in the week ended Aug. 6, accelerating a flight that started last month and bringing net outflows to $9.75 billion this year, according to data provider Lipper
- Sovereign yields lower, except Greece 10Y yield which is ~7bps higher. Euro Stoxx Banks little changed. Asian stocks mostly lower, with Chinese stocks higher. European equities drop, U.S. stock futures fall. WTI crude and gold higher, copper falls
