Yields Impact Sentiment, China Evergrande's Filing Makes Waves

Global markets grappled with yield dynamics, US-China currency interventions, and China Evergrande's bankruptcy filing, shaping a mixed trading landscape.

Key Factors for Today

• Global stocks close lower as US yield curve adjusts
• Positive signals from August Philadelphia Fed Survey
• Japan's persistent inflation fuels Yen uncertainty
• PBOC intervention boosts WTI, aims to strengthen Yuan
• EUR/USD slump continues after ECB's cautious stance
• China Evergrande seeks Chapter 15 protection in US courts

Market Movers

• Tech sector hit by higher borrowing costs
• Gold retreats near $1890/oz, eyes on $1900/oz
• USD/JPY drops from eight-session high, targets 145.00
• WTI rebounds, establishes support at $80/bbl
• EUR/USD's 5-session slide breaches $1.09, shifts focus to $1.0850

Economic Calendar

• UK Retail Sales
• EA Inflation Rate
• China FDI
• Spain Consumer Confidence

The Big News

 Yield Dynamics Shake Global Markets: Tech Sector Bears the Brunt

Yield dynamics weighed on market sentiment, prompting a global retreat in stock markets. The US yield curve's movement towards normalization led to increased yields on the long-end, driven by short liquidity. This adjustment saw a toll on the tech sector, with borrowing costs rising and investor risk appetite dampened.

Philadelphia Fed Survey Brings Hope Amid Inflation Concerns

On a positive note, the August Philadelphia Fed business outlook survey delivered promising results. The survey's index surged to +12 from a prior reading of -10, indicating a notable improvement in business sentiment. New orders showed robust growth, climbing 16 points from -16, a sign of potential economic resilience. However, inflation concerns lingered as the prices paid index surged to 20.8 from 9.5 previously, suggesting ongoing inflationary pressures.

Japan's Inflation Holds Steady, BOJ Confronts Policy Dilemma

Japan's inflation narrative unfolded with headline inflation staying elevated at 3.3%, in line with expectations. Notably, the core rate dipped to 3.1% as anticipated, down from the previous 3.3%. The BOJ grapples with the challenge of reigning in its easing policy, as the core-core inflation figure rose to 4.3% from 4.2%. The Yen experienced a reversal, with USD/JPY's eight-session winning streak ending at 146.60, setting a course toward 145.00 and lower.

PBOC's Currency Intervention: A Boost for Commodities and Markets

China's currency intervention strategies took centre stage, impacting commodities and markets. Reports circulated of the PBOC instructing major banks to bolster Yuan support by increasing USD sales, leading to a reversal of the currency's decline. The central bank's move to strengthen the Yuan through a reference rate adjustment further influenced market sentiment. Commodities, including WTI, staged a rebound as the PBOC's actions instilled renewed confidence. WTI successfully recovered from its recent downtrend, finding robust support at $80/bbl, while resistance levels at $81.20/bbl and $82.40/bbl loom ahead.

EUR/USD's Slide Continues Amid ECB Hawk's Cautious Stance

EUR/USD's downturn persisted, driven by cautious statements from ECB hawk Martins Kazaks. Kazaks downplayed the prospect of significant rate hikes, emphasizing that inflation's downward trajectory must be considered. The pair marked its fifth consecutive decline, breaching the $1.09 level, and traders are now eying $1.0850 as the next crucial threshold.

China Evergrande's Chapter 15 Filing Amplifies Real Estate Concerns

In a significant development, China Evergrande, a prominent developer embroiled in China's real estate turmoil, filed for Chapter 15 protection in US courts. This move follows concerns over missed debt payments by China's largest developer, Country Garden. The market's response was swift, as the Hang Seng index stumbled 2% lower to 18,000, amplifying worries about the broader implications of China's real estate woes.