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What Is the Yen Carry Trade?

What’s in Today’s Report:

  • What Is the Yen Carry Trade and Why Does it Matter to Markets?
  • Manheim Used Car Index Takeaways
  • S&P 500 Chart – Summer Uptrend Has Been Violated

Markets are risk-off this morning thanks to soft Chinese economic data, disappointing UPS earnings and guidance (shares are down over 6% in the premarket), and negative banking sector news in the U.S. and Europe.

Economically, Chinese exports fell -14.5% vs. (E) -12.6% in July, the steepest drop since the pandemic while imports also fell much more than expected which raises further concerns about the health of the Chinese economy, which was supposed to be a major source of global growth this year.

A surprise windfall tax on bank profits announced by the Italian government paired with Moody’s downgrading 10 smaller U.S. banks is weighing heavily on financials this morning and acting as a headwind on the broader equity indices as well.

Looking into today’s session, there is one economic report to watch: International Trade in Goods and Services (E: -$65.4B) and two Fed speakers: Harker (8:15 a.m. ET) and Barkin (8:30 a.m. ET), all scheduled for before the opening bell. The trade data shouldn’t move markets but if Harker and/or Barkin strike a more hawkish than anticipated tone today, that could send bond yields higher and weigh on equities.

Finally the Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET and any meaningful moves in yields (higher or lower) could influence equity market trading this afternoon.

Three Reasons the June Lows Could Hold

What’s in Today’s Report:

  • Three Reasons the June Lows Could Hold
  • Understanding Japan’s Currency Intervention

Futures are sharply lower as global yields continued to climb while economic data was largely disappointing.

September flash PMIs showed contraction in the EU (48.2) and the UK (48.4) as signs of a global slowdown grow.

The UK government announced a fiscal stimulus package but the news is spiking UK bond yields and pressuring the Pound as markets view it as inflationary.

Today we get speeches from Powell (2:00 p.m. ET) and Brainard, but don’t expect their message to be any different then what was just said at Wednesday’s FOMC meeting.  Beyond the Fed speak, the key economic report today is the September Flash Composite PMI (E: 47.0) and this data points needs to largely meet expectations, because a strong number will push yields higher, while a weak number will increase stagflation concerns.