After a nearly 30% near-continuous rally, the Hang Seng Index slid more than 4.5% today at the peak of the sell-off, indicating the biggest sell-off in 2 years, following an uninterrupted 13-day upward streak. However, index rebound after the sell-off, now losing 1%, but futures on Chinese benchmarks such as CHN.cash suggest a further sell-off in Chinese assets and profit taking. Markets in mainland China are closed due to Golden Week.
- As a result of the declines in China, we are seeing weaker sentiment in the European stock market as well, where among the losing companies, almost all indices on the Old Continent 'lead' the way with stocks that have seen significant gains in recent days, supported by optimism in China.
- In Germany, automotive companies are losing ground, with Porsche AG (P911.DE) slipping nearly 3%, while chemical and commodity companies are also sold off; the German DAX loses almost 1%. US-listed Chinese ADRs are also likely to open lower today; Wall Street contracts are also trading down between 0.5%-1% before the open, with the VIX gaining nearly 3%.
- Oil prices have been rising for almost a third consecutive day, although they saw a slight correction yesterday. Currently, Brent is still trading around $75 per barrel. US President Joe Biden asked Israel to refrain from attacking Iranian nuclear facilities.
- A stronger-than-expected ADP report prompted markets yesterday to lower expectations for an aggressive Fed interest rate cut, in November. Currently, the market is pricing in a 33bp cut versus 44bp last week, leaning more and more towards a smaller rate cut, of 25bp. As a result, EURUSD is losing nearly 0.13% today by retreating to 1.103.
- Hong Kong retail sales, published today, came in -10.1 YoY vs -9% exp. and -11.8% previously. Reading is clearly stronger than before, however it's important to know, that stimulus will not boost Chinese consumption immediately, while overall demand across the economy remains weak, with a double-digit decline in Hong Kong region (last year consumption was also quite weak, while now it is much worse).
CHN.cash chart (M15 interval)
Source: xStation5
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