Market Movers: DXY higher, China woes continue – TDS

FXStreet (Barcelona) – Prashant Newnaha, Strategist at TD Securities, summarizes the financial market performance and key developments during the Asian trading session, and further comments on the Chinese equity performance and the actions taken by authorities to support the market.

Key Quotes

“The DXY hit a 5 week high and commodities were whacked in US trade as the Greek debt drama remained unresolved and China fears spread.”

“With no official Greek proposal tabled to EU officials and comments from Juncker that a Grexit scenario had been planned in detail, this helped trigger a round of short covering and safe haven buying, the long end the clear beneficiary, US 30yrs back below 3% in Asia. Australian fixed income outperformed in our time zone.”

“Copper hitting 6yr lows, nickel off 9% and iron ore futures down nearly 8% in China provided a firm bid for ACGBs (3yrs –8bps, 10yrs –12bps) as did the sharp move lower again in Chinese equities. The Shanghai composite was down more than 8% on the open, despite more than 50% of Shanghai and Shenzhen listed companies being suspended today. H shares in HK also fell 6.7% at one point, the most since Sep 2011. What then followed were a flurry of announcements to support the market—raising margin requirements for CSI 500 index futures, the State Owned Assets Supervision and Administration Commission (SASAC) ordering SoEs to not cut holdings of listed companies, and the China Securities Finance Corporation (CSFC) requesting more than 500b yuan to support the market, following an injection of capital to 100b yuan over the weekend. Following today’s announcements Chinese equities staged a mild recovery, but remain down, close to 5%. It’s too early to say, whether these additional measures will be supportive but the Shanghai composite bounced off the 200 day moving average today.”

“In FX, the USD is giving back some of last night’s gains, but the commodity currencies are not far from the new lows for this move.”

“In OIS space, expectations for the Fed to hike in Sep are now just 25%, while expectations for the RBA to cut in August have nudged a little higher to 42%.”

Prashant Newnaha, Strategist at TD Securities, summarizes the financial market performance and key developments during the Asian trading session, and further comments on the Chinese equity performance and the actions taken by authorities to support the market.

(Market News Provided by FXstreet)