Stocks Stage Feeble Attempt At Dead Cat Bounce After Losing $1.3 Trillion In One Day

US index futures staged a feeble, fading attempt to bounce on Tuesday, following Monday’s crash that wiped out $1.3 trillion in market cap and topped a furious 4-day selloff that was the worst since March 2020 and culminated in a bear market amid expectations – even from permabull Goldman – that the Fed’s now accepted 75bps rate hike on Wednesday will hurl the economy into a recession. Futures on the S&P 500 rebounded more than 1% in early trading before fading the gain to just 0.24%, while Nasdaq 100 futures climbed 0.5%.

US stocks plunged on Monday to the lowest level since January 2021 and closed more than 20% below its January record high, triggering Joe Biden first official bear market. Global equities sold off after an unexpectedly strong reading Friday on US inflation sparked concern that the Fed will go too far in raising interest rates to tame soaring prices. Bond yields dipped after soaring to a peak last seen in 2011. The yield curve remained flat, however, underscoring worries about an economic downturn sparked by tighter monetary policy, with the 2s10s curve just 1bps away from inverting again.  Cryptocurrencies, meanwhile, plunged with bitcoin puking more than 10% to below $21,000 before paring much of the slide as dip buyers emerged. UBS said most long-term owners are now in the red and warned of more losses if coin miners buckle under the pressure and start selling. The dollar was steady near a two-year high. In Japan, the central bank boosted bond-purchase operations to keep yields in check. The yen hovered near a 24-year low against the greenback.

“We remain bearish on equity outlook,” said Marija Veitmane, a senior strategist at State Street Global Markets. “Inflation is still a huge problem and central banks need to be very aggressive to fight it. This is a very negative outlook for stocks, so we would be sellers of any rally.”

Among notable premarket movers, shares of megacap tech companies like Apple, Microsoft, Alphabet, Tesla and Meta Platforms were slightly higher and poised to recoup some of the losses from Monday: Apple (AAPL US) +1.4%, Amazon (AMZN US) +1.7%, Alphabet (GOOGL US) +1.5%, Meta Platforms (META US) +1.9% and Nvidia (NVDA US) +1.8% in premarket trading. Oracle shares rose 13% in premarket trading after the software company reported higher-than-expected fourth-quarter results. Here are the most notable premarket movers:

• AMC Entertainment (AMC US) shares rise as much as 3.7% in US premarket trading, in line with a broader rebound in risk assets, and after the movie theater operator said that last weekend’s admission revenues beat that of the same weekend of 2019.
• Adobe (ADBE US) slides 4.2% in premarket trading as Citi cut its price target on the company to $425, the lowest on Wall Street, citing weaker consumer spending and potentially rising competition.
• US-listed Chinese stocks post broad-based gains in premarket trading, on track to rebound from a three-day drop, as sentiment toward tech stabilizes: Alibaba (BABA US) shares rise 3.8%, Baidu (BIDU US) +4%, Pinduoduo (PDD US) +4.2%, JD.com (JD US) +3.2% and Li Auto (LI US) +6.1%
• Braze (BRZE US) shares jump 8% in premarket trading after the company’s first-quarter revenue beat estimates, and full-year guidance also topped expectations.
• Arista (ANET US) shares decline 4.1% in US premarket trading as Morgan Stanley says in a note that the company, as well as Wiwynn and memory stocks such as SK Hynix and Micron (MU US) are among those most at risk in the semiconductor and networking equipment space when tech firms cut spending on data centers.
• Kaival Brands (KAVL US) shares surge as much as 57% in US premarket trading, after the vaping products distributor reached deal with Philip Morris to distribute electronic nicotine delivery systems products outside of the US.
• Outset Medical (OM US) shares fall 4.6% in premarket trading as their price target was cut to a Street-low at Cowen, after the medical technology firm halted shipments on its Tablo Hemodialysis System for home use. The company also suspended guidance for the year.
• US Silica (SLCA US) shares may be in focus after they were upgraded to outperform from inline at Evercore ISI following the conclusion of the industrial minerals firm’s review of its Industrial & Specialty Products (ISP) segment.

With just two weeks left until the end of Q2, a dismal picture emerges: this quarter is set to deliver the biggest combined loss for global bonds and stocks on record, according to Bloomberg. The highest inflation in a generation, stoked by supply-chain and commodity-market disruptions amid China’s Covid struggles and the war in Ukraine, is roiling the outlook. According to Bloomberg,  the big question is whether the Fed and other major central banks will tip their economies into recession as they tighten financial conditions. We disagree: a recession is now assured; the real big question is how sparking a recession in the US will force Putin to pump more gas.

European gains were shorter-lived: Euro Stoxx 50 reverses a 1.1% bounce to trade down 0.2%, extending its decline to a sixth day, on track for the longest losing streak since the start of the pandemic and the lowest closing level in 15 months. Retail, media and travel are the weakest Stoxx 600 sectors with broad-based sectoral gains fading as the session progresses. Bonds in most of Europe edged lower, but gilts bucked the trend after data showed spending power of UK households plunged as inflation eroded wage increases. Here are the biggest European movers:

• Fortum shares rose as much as 9.5%, while Uniper gained 6.1% as Finland is prepared to give Fortum time to sell its Russian power plants and follow other western energy companies out of Russia.
• Rates-sensitive banking stocks in Europe outperform Tuesday as Treasury yields drop following four consecutive days of increases that lifted the 10-year to the highest level since 2011.
• HSBC shares gain as much as 3.2%, Standard Chartered +3.2%, Nordea Bank +2.7%, ING +2.8%
• Wizz Air shares rise as much as 6.2% after Berenberg upgraded the airline to buy from hold, citing the long-term potential of its business, despite numerous recent challenges.
• Go-Ahead rises as much as 15% amid a potential bidding war. The company accepted a £648m takeover bid from an investor group backed by Australian rival Kinetic, while Kelsian is assessing whether to make offer.
• Saipem gains as much as 8.5% after five sessions of declines; the company and Trevi signed memorandum of understanding for foundation drilling solutions and services for offshore wind farm projects.
• Atos shares plunge as much as 27% after the company announced the departure of newly arrived CEO Rodolphe Belmer and a separation into two publicly listed companies.
• Akzo Nobel shares decline as much as 6.1% after the company reduced 2Q forecasts due to China lockdowns and slower start to EMEA DIY season.
• Air France-KLM shares fall as much as 13% after the company raised EU2.3b in a deeply discounted rights offering to help repay state aid received during the pandemic.

Earlier in the session, Asian stock market indexes hit bleak milestones in quick succession on Tuesday as investor concerns worsened that aggressive interest rate increases in the US could erode corporate earnings. The MSCI Asia Pacific Index dropped as much as 2% to its lowest level in a month after the world equities gauge entered a bear market overnight before paring losses. New Zealand’s stock index extended its decline to 20% from a peak reached last year, entering a bear market, while Singapore’s measure wiped out its gains for 2022. Traders are betting that the Fed will deliver a 75-basis-point rate increase in this week’s meeting — the biggest since 1994 — after US inflation hit a four-decade high in May. This is further muddying the economic outlook at a time supply chains are snarled, weighing on the valuation and profit estimates for the MSCI Asia index, which has lost 17% this year.

“Bets are off for all asset classes as investors brace themselves for tough action from the Fed to counter higher-than-expected inflation,” said Justin Tang, head of Asian research at United First Partners in Singapore. “The renewed lockdowns in China are also not going to be helpful.” Central banks from South Korea and Australia to India have been raising rates in response to accelerating inflation, with the latter two announcing 50-basis-point increases in their latest decisions.

China’s persistent zero-Covid strategy is another factor disproportionately affecting companies in Asia. Singapore’s Straits Times Index is near a correction, down 9.7% from an April high, while Australia’s S&P/ASX 200 Index has dropped 12% over a similar period. Elsewhere, the MSCI Asean Index is inching closer to a 20% drop from a peak reached in January 2021, while South Korea’s Kospi remains mired in a bear market.  Still, investors have identified some potential areas of outperformance, as Asia’s stock measure has held up better than global peers as it continues to trade at a lower forward price-to-earnings ratio. And while China has walked back on loosening some Covid-19 restrictions in Beijing and Shanghai, traders see the country’s fiscal and monetary easing stance giving its beleaguered stocks a further boost.  “China might outperform global equities, as it did in May and early June,” if consumption resumes in the coming months after a relaxation in lockdowns, said Herald van der Linde, head of APAC equity strategy at HSBC Holdings Plc. Meanwhile, commodity-exporting Southeast Asian countries such as Indonesia, which are also benefiting from border reopenings, are expected to continue to shine. The Jakarta Composite Index rose on Tuesday, taking its advance to 7.1% this year.

India was no exception to the global rout, and stock gauges fell to their lowest levels in 11-months as inflation and interest-rate concerns continued to fuel selloffs across global equity markets.  The S&P BSE Sensex fell 0.3% to 52,693.57 in Mumbai after rising as much as 0.5% during the session. The NSE Nifty 50 Index dropped by an similar measure to its lowest since July 28. Both benchmarks have dropped more than 14% from October peaks. Foreign institutional investors have taken out $24.2 billion from local stocks this year through June 10, and the selloff is headed for its ninth consecutive month. However, the key indexes have still outperformed Asia Pacific and emerging-market peers this year, helped by net $26.4 billion of stock purchases by domestic investors, which include mutual funds and insurance companies. Consumer-price inflation in India has stayed above the central bank’s target in May while wholesale prices accelerated for a third-straight month as input costs continue to rise for manufacturers. “High inflationary environment, fresh curbs in China and rising crude oil prices are likely to keep the markets under pressure for a while,” Motilal Oswal analyst Siddhartha Khemka wrote in a note.  Reliance Industries contributed the most to the Sensex’s decline, decreasing 1.3%. Among the 30 shares in the Sensex Index, 15 rose, 14 fell and one was unchanged.

In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against most of its Group-of-10 peers.  The euro rose from a one-month low against the dollar but still failed to retrace the recent plunge in a meaningful way. German June ZEW expectations came in at -28.0 versus estimate -26.8. Norway’s krone slumped to a fresh 4-week low against the euro after Norges Bank’s regional network report showed businesses were expecting growth to slow. Sweden’s krona got a temporary boost after inflation figures for May came in higher than the median estimate in a Bloomberg survey. A Riksbank survey showed businesses, which are seeing sharp cost increases, are concerned that the coming wage bargaining rounds will lead to higher salary costs than in previous collective agreements. The Swiss franc led G-10 gains as it pared most of yesterday’s drop against the dollar. The pound edged up from a two-year low against the dollar. Sterling remained on the back foot after UK labour market data showed limited further tightening in the jobs market, suggesting that the BOE may raise interest rates by 25bps this week, rather than 50bps. Australian sovereign bonds plunged in catch-up to a two-day rout in Treasuries as the specter of a 75bps Fed hike on Wednesday loomed large. Aussie steadied following a bounce in US stock futures. USD/JPY consolidated. The Bank of Japan ramped up the defense of its policy framework after yields came under renewed upward pressure, unveiling a further set of unscheduled buying operations, including purchases of much longer maturities

In rates, treasuries bull steepened with front-end yields richer by 8.5bp on the day into US morning session. S&P futures slightly higher, although remain near Monday session lows as investors continue to position ahead of Wednesday’s Fed decision. Swaps market prices in just under 200bp of rate hikes over the next three meetings with 70bp priced into Wednesday’s decision. Three-month Libor fix jumps over 17bp. US yields richer by 8.5bp to 5bp across the curve with front-end led gains steepening 2s10s, 5s30s spreads by 2.1bp and 1.5bp; 10-year yields around 3.30% and outperforming bunds by 7bp on the day. IG dollar issuance slate; projections for the session remain murky amid markets turmoil and after a number of deals were put on ice Monday. Gilts put in a ~6bps parallel richening move across the curve. Bunds buck the trend, bear-steepening ahead of scheduled comments from ECB’s Schnabel on euro-area bond market fragmentation due later.

In commodities, oil held above $120 a barrel as investors evaluated a tight supply outlook and the impact of China’s eventual return from virus curbs. WTI adds 0.7% to trade near $121.71, Brent holds above $123. Spot gold trades a narrow range, fading after hitting $1,830/oz. Base metals are mixed; LME tin falls 5.1% while LME zinc gains 0.3%.

To the day ahead now. The ECB’s Schnabel speaks, while in data we get UK jobless claims, ILO unemployment rate, ZEW surveys for the Eurozone and Germany, US NFIB small business optimism and PPI, and Canadian manufacturing sales. Hold on to your hats.

Market Snapshot

• S&P 500 futures up 1.1% to 3,790.50
• STOXX Europe 600 up 0.1% to 413.07
• MXAP down 0.9% to 159.98
• MXAPJ down 0.6% to 529.25
• Nikkei down 1.3% to 26,629.86
• Topix down 1.2% to 1,878.45
• Hang Seng Index little changed at 21,067.99
• Shanghai Composite up 1.0% to 3,288.91
• Sensex down 0.2% to 52,743.72
• Australia S&P/ASX 200 down 3.5% to 6,686.03
• Kospi down 0.5% to 2,492.97
• Brent Futures up 0.7% to $123.15/bbl
• Gold spot up 0.6% to $1,829.72
• U.S. Dollar Index down 0.34% to 104.72
• German 10Y yield little changed at 1.62%
• Euro up 0.6% to $1.0473
• Brent Futures up 0.7% to $123.17/bbl

Top Overnight News from Bloomberg

• The latest jumps in consumer prices and inflation expectations will probably spur Federal Reserve officials to consider the biggest interest-rate increase since 1994 when they meet this week, after Chair Jerome Powell previously signaled a smaller move was the likely outcome
• JPMorgan Chase & Co. and Goldman Sachs Group Inc. are withdrawing from handling trades of Russian debt after the Biden administration’s surprise announcement last week it’s banning US investors from scooping up such assets
• As the BOJ escalates attempts to keep a lid on bond yields, BlueBay is betting the central bank will be forced to abandon a policy that’s increasingly out of sync with global peers. The BOJ’s so- called yield curve control is “untenable,” according to Mark Dowding, BlueBay’s London-based chief investment officer
• Investor fears of stagflation are at the highest since the 2008 financial crisis, while global growth optimism has sunk to a record low, according to Bank of America Corp.’s monthly fund manager survey

A more detailed look at global markets courtesy of Newsquawk

Asia-Pacific stocks were pressured following the global stock and bond slump as the aftershock from recent hot US inflation reverberated across risk assets and spurred further expectations for a 75bps Fed rate hike this week. ASX 200 was the worst performer as the losses caught up to the index on return from the extended weekend and with the declines led by underperformance in tech and metals. Nikkei 225 extended its declines despite the BoJ’s efforts to cap yields and with the recent rapid currency moves adding to the uncertainty. Hang Seng and Shanghai Comp. were negative as lockdown concerns lingered with China’s Vice Premier Sun suggesting it is necessary to strengthen COVID-19 prevention and control of key places, while Shanghai’s Minhang district plans to conduct mass testing on Saturday.

Top Asian News

• Shanghai’s Minhang district is planning mass COVID-19 testing on Saturday, according to Bloomberg.
• BoJ announced additional bond purchases for Wednesday in which it will increase purchases of JGBs across several maturities, while it will continue to conduct additional buying as needed, according to Reuters.

European bourses began on the front-foot but quickly slipped into negative territory, Euro Stoxx 50 -0.8%; since the post-open dip, price action has steadily deteriorated further. However, while US futures are directionally in-fitting they remain in positive territory, ES +0.3%; albeit, well of highs and the ES resides around 3760 currently awaiting Fed clarity amid increasing speculation for 75bp. Oracle Corp (ORCL) Q4 2022 (USD): Adj. EPS 1.54 (exp. 1.37), Revenue 11.8bln (exp. 11.66bln). Cloud License And On-Premise License: 2.54bln (exp. 2.19bln). Cloud Services And Licenses Support: 7.6bln (exp. 7.77bln). Total Hardware Revenues: 856mln (exp. 857.71mln). Total Services Revenues: 833mln (exp. 847.89mln). Added USD 15.8bln after Cerner acquisition and it expects cloud business to grow by over 30% in FY23; Co. expects Q1 rev. including Cerner to grow 17%-19%. (PR Newswire) +12% in the pre-market. German cartel office has commenced proceedings against Apple (AAPL) re. tracking regulations for 3rd party apps, via Reuters.

Top European News

• The EU is set to launch three separate lawsuits against the British government after it published its plans to override the protocol, according to the Telegraph. One option would reportedly see the EU end financial equivalence for the City of London.
• US urged the UK and EU to return to talks to resolve differences over the Northern Ireland Protocol and said it remains a priority to protect gains of the Good Friday Agreement.
• White House said proposed changes to N. Ireland Protocol won’t be an impediment to potential US-UK trade deal or trade dialogue talks in Boston, according to Reuters.
• UK PM Johnson is not looking to lower household taxes until inflation is brought under control, as such action is unlikely before next year, according to the Telegraph.

FX

• Dollar consolidates after Monday’s melt up to new multi year peaks as clock ticks down to FOMC and US PPI data; DXY hovers around 105.00 and just shy of new 105.290 YTD high.
• Franc outperforms following suspension of trade in Russia against Rouble and Greenback; Usd/Chf probes 0.9000 to downside after pulling up only pips short of parity yesterday.
• Euro rebounds amidst more hawkish commentary from ECB’s Knot and irrespective of German ZEW survey misses; EUR/USD back above 1.0400 and decent option expiries between 1.0420-15.
• Aussie undermined by waning risk appetite and ongoing covid outbreaks in China, but underpinned by RBA Governor Lowe underlining determination to get inflation back to target, AUD/USD towards lower end of 0.6970-18 range.
• Pound fades after brief upturn in bigger than expected rise in UK employment as other labour market metrics fall short of expectations and EU rift over NI protocol persists; Cable on the cusp of 1.2100 after fleeting breach of round above, EUR/GBP crosses 0.8600 to set fresh 2 month apex.

Fixed Income

• Recovery in EZ debt derailed by supply and hawkish remarks from ECB’s Knot as Bunds retreat to 145.00 within a 145.58-144.51 range
• Gilts and 10 year T-note hold up better between 112.97-29 and 116-03/115-01+ parameters in consolidation after Monday’s rout and ahead of US PPI data
• ** BTP/Bund** spread blows out beyond 250 bp in advance of ECB’s Schnabel on fragmentation in bond markets

Commodities

• WTI and Brent are firmer by circa. USD 1.0/bbl at present and reside towards the mid-point of a USD ~2.00/bbl range with specific newsflow thin and broader developments on familiar themes.
• Themes which include China COVID and travel demand, for instance; but, factors which are overshadowed by broader anticipation going into Wednesday’s FOMC.
• US and Saudi Arabia will announce on Tuesday that US President Biden will visit Saudi Arabia on July 15th and 16th, according to NBC’s Pegram citing sources.
• China’s state planner is to increase retail prices of gasoline and diesel by CNY 390/tonne and CNY 375/tonne respectively as of June 15th, via NDRC.
• Spot gold is essentially unchanged on the session around USD 1820/oz after falling below the 10-, 21- & 200-DMAs yesterday; Copper softer amid broader risk.

US Event Calendar

• 08:30: May PPI Final Demand MoM, est. 0.8%, prior 0.5%; YoY, est. 10.9%, prior 11.0%
• 08:30: May PPI Ex Food and Energy MoM, est. 0.6%, prior 0.4%; YoY, est. 8.6%, prior 8.8%
• 08:30: May PPI Final Demand

DB’s Jim Reid concludes the overnight wrap

Where do we start this morning after as action packed a 24 hours as I can remember. The global equity and bond sell-off would have been bad anyway but the late US session headlines from a WSJ article (written by a journalist close to the Fed) that suggested the FOMC may need to surprise with a +75bp hike tomorrow was the last straw. Before we delve into the article and more detail on markets let’s take a one para overview of all the main market highlights.

To start with, 2yr USTs capped their largest two-day move (+54.3bps, +29.1bps yesterday), since the week following Lehman’s collapse, while 10yr Treasuries have risen +31.8bps over the last two days (+20.4bps yesterday), the largest such move since December 2010, bringing the 10yr to 3.36%, the highest since 2011. Meanwhile, the 2s10s yield curve swung around violently before closing in inverted territory (-0.3bps) again for the first time since the first days of April and for only the 15th day out of the 3907 business days since May 2007. The historic moves didn’t end with the Treasury market, as Italian 10yr BTP yields (+26.2bps) crossed 4.0% for the first time since 2014, the crossover index widened +32.3bps to 534bps, its widest level since 2012 outside of peak initial Covid widening, Bitcoin fell -15.13% to its lowest since late 2020 and is down another -5.23% this morning, the S&P 500 (-3.88%) finally entered bear market territory (-21.8% from its YTD peaks), while the dollar index surged to its highest level since 2002. So quite a ride although as we’ll see below risk is doing a bit better this morning with yields relatively flat.

Going through things in more detail, the Treasury market has been at the epicentre of this sell-off after the shocking CPI from last Friday. Yields were drifting higher all day as some on the Street officially updated their call for +75bp on Wednesday and openly considered whether the Fed will need a +100bp hike. The WSJ report then later threw gasoline on the already raging fire, noting the Fed was indeed “considering surprising markets with a larger-than expected” +75bp hike as early as this week given Friday’s alarming CPI and inflation expectations data. All-in, Fed funds futures moved to price in a 94% chance of a +75bp hike on Wednesday. So a +75bp hike on Wednesday won’t come as a surprise anymore.

At the end of the day, 2yr yields gained +29.1bps yesterday and +25.2bps Friday, bringing the rate to 3.35%. The 2s10s yield curve inverted, closing the day at -0.3bps, as 10yr yields climbed +11.4bps Friday and +20.4bps yesterday, bringing rates to 3.36%, their highest level since April 2011. As we go to press this morning, 2yr yields are up another 2bps with 10yr yields fractionally higher, thus inverting the curve a little more. US PPI today will be closely watched for the next inflation impulse.

The policy rate at end 2022 implied by fed funds futures closed at 3.72%, its highest to date by some margin, and implies just shy of +300bps of tightening over 5 meetings. Markets also moved to price in a terminal rate above 4% in the middle of next year, closer to DB’s call which has been the most aggressive on the street. It’s perhaps an understatement to say the market will be hyper focused on how the Fed communicates the near-term path of policy at this week’s FOMC, especially including what size rate hikes they’re considering as adequate for the rest of the year.

The selloff was echoed in Europe, where 10yr bunds (+11.5bps), OATs (+15.4bps), and BTPs (+26.2bps) all soldoff, even before the blockbuster WSJ report. ECB speakers returned to the docket after last week’s meeting, where Governing Council member Kazmir noted there was a clear need for a +50bp hike in September, in line with our European economics team’s call. Kazmir went on to warn that the economy faces weak growth for several quarters, piling onto what the market had already deduced – the sharp global repricing in monetary policy would weigh on growth. One of the major fears following the ECB meeting was that absent a new tool designed to stem fragmentation, peripheral spreads would widen out, and yesterday brought a fresh round of peripheral widening, with 10yr Italian spreads widening +14.6bps to bunds, with Spanish bonds widening +9.9bps. Indeed, 10yr BTPs crossed 4.0% for the first time since 2014.

Equity markets got the message, selling off across the Atlantic, with the S&P 500 falling -3.87% into bear market territory, down -21.82% from the all-time highs reached in early January, with the STOXX 600 down -2.41%. At one point, every single share in the S&P 500 was lower, though the index staged a heroic rally leaving 5 shares higher on the day. That’s the lowest amount since June 11, 2020 when only one share advanced. Unsurprisingly, every S&P 500 sector was lower, with all but two sectors declining by more than 3%. The NASDAQ fell -4.68% on the hit from higher discount rates, now -32.68% from its November high. Mega-cap shares bore the brunt of higher discount rates, with the FANG+ falling -6.50%, its worst day since September 2020, and -40.98% lower from its own all-time highs reached in November. Markets are trying to bounce this morning with S&P 500 futures +1% and Nasdaq futures +1.15%

As we discussed yesterday, this sharp rates repricing is partly due to another attempt at forward guidance from the Fed. Having signalled 50bps at the next two meetings a few weeks ago they reduced volatility. However when it became clear that this guidance may be insufficient it has opened up a market attack. The last man standing continues to be the BoJ and to be honest the more the market attacks the Fed and the ECB the more likely it is that the BoJ own forward guidance (in the form of YCC) will end very messily with huge implications for global rates. If the BoJ throws in the towel in H2 then global bond markets lose a huge anchor. Certainly one to watch for every morning when you wake up! Indeed the BOJ ramped up its scheduled purchases of 5-to-10-year debt today from an expected ¥500 billion to ¥800 billion as the yield on the 10yr JGBs jumped to 0.255%, edging past the upper end of the central bank’s 0.25% target range.

Talking of Asia, equity markets are lower this morning but markets are trying to fight back. The Nikkei (-2.00%) is the largest underperformer with the Hang Seng (-1.15%) and Kospi (-1.11%) also lagging. In mainland China, the Shanghai Composite (-1.60%) and CSI (-1.86%) are also lower. Elsewhere, the S&P/ASX 200 is -4.54% lower after returning to trade following a holiday yesterday.

In such a broad-based selloff, many would have been interested in how crypto assets would hold up, supposedly uncorrelated with traditional assets. However, digital assets did not escape the wrath of plummeting risk sentiment, with bitcoin falling -15.13% and down another -5.28% this morning as we type. At one point this morning, Bitcoin fell about -10% to trade at $20,823 before recovering a little. There were reports that some exchanges were having trouble liquidating holdings of various crypto assets. This is a classic deleveraging and unwinding of a bubble trade.

To the day ahead now. The ECB’s Schnabel speaks, while in data we get UK jobless claims, ILO unemployment rate, ZEW surveys for the Eurozone and Germany, US NFIB small business optimism and PPI, and Canadian manufacturing sales. Hold on to your hats.