The Rout In Emerging Markets Isn't Over: 5 Things The Global Markets Are Talking About Today

In the last week of August, it was trade and tariff wars along with emergine markets currency capitulation that were the driving forces behind asset prices.

Thrown into the mix, G10 central banks and geopolitical risks, the month of September volatility should not disappoint.

Topping investors' agenda this week is the Sino-U.S. trade dispute and NAFTA talks with Canada, which are both threatening to escalate along.  Emerging market tensions remain high in the face of Argentina's austerity measures.

President Trump may also announce the implementation of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday.

Brexit discussions are again pressuring sterling, now that the market is pricing 25 percent odds that Britain could leave the E.U. next March without a deal.

On the data front, the first of the month brings final PMI readings for manufacturing, services and a composite reading. Australia releases Q2 GDP data Tuesday evening and Canada will release its important merchandise trade and employment report in the coming days. The Bank of Canada (BoC) is expected to hold rates steady on Wednesday.

Stateside, international trade, construction spending, factory orders and Friday's non-farm payrolls are the key releases this week.

With all this in mind, here are five things the global markets were talking about Tuesday morning.

1. Asian Stocks Rally After Early Losses

On the whole, Asian shares rallied overnight, but investors remain apprehensive as the Sino-U.S. trade dispute threatens to escalate this week.

In Japan, the Nikkei edged a tad lower, falling 0.1 percent, after trading back-and-forth between positive and negative territory. The broader Topix also fell 0.1 percent as investors wait to take their cue this week from the states.

Down-under, Australian shares fell overnight as reports of fresh investigations into financial institutions kept investors on edge. The S&P/ASX 200 index dropped 0.3 percent at the close of trade. In South Korea, the Kospi stock index rallied 0.38 percent following the turnaround in Chinese shares, despite further threats in the Sino-U.S. trade war.

In Hong Kong, stocks ended higher as telecom shares rallied on merger speculations. The Hang Seng index ended 0.9 percent higher, while the China Enterprises Index closed up 0.7 percent.

In China, equities snapped a 5-day losing streak, as investors hunted for bargains in beaten-down real estate and banking stocks. However, pending U.S. tariffs capped gains. The Shanghai Composite index closed up 1.1 percent, while the blue-chip CSI300 index ended 1.27 percent higher.

2. Oil Rallies As Gulf Of Mexico Rigs Are Evacuated

Oil prices rallied aggressively overnight on news of the immediate evacuation of two Gulf of Mexico oil platforms in preparation for a hurricane.

U.S. light crude rallied $1.31 a barrel from Friday's close to $71.11 — its highest since mid-July — while Brent crude is up $1.00 at $79.15 a barrel.

Oil markets have tightened over the past four weeks, pushing up Brent prices by more than 10 percent as investors anticipate less supply from Iran as U.S. sanctions on Tehran begin to hurt.

3. Australia Isn't Raising Rates Soon

The Reserve Bank of Australia (RBA) left their cash rate target unchanged at 1.50 percent as expected overnight and the accompanying statement was little changed from the last go-around. Policy makers reiterated their stance that low rates were supporting the economy and inflation, and that progress on unemployment/inflation is expected to be gradual. They saw GDP to average slightly higher than 3 percent in both 2019 and 2020.

In Europe, tame Swiss inflation data support the view that the Swiss National Bank (SNB) will not be raising rates before the ECB does (currently expected in September 2019). Data this morning showed that annual Swiss inflation was 1.2 percent last month, while core inflation was just 0.5 percent.

Elsewhere, the yield on 10-year Treasuries gained 2 bps to 2.88 percent, the biggest advance in a week. In Germany, the 10-year Bund yield climbed 2 bps to 0.35 percent. In the U.K., the 10-year Gilt yield declined 2 bps to 1.404 percent, the lowest in more than a week.

4. The Rout In Emerging Markets Isn't Over

The USD continues to find safe-haven support related to concerns about trade tensions as emerging market currency pairs suffer.

On Monday, Argentine President Macri announced new taxes on exports and steep cuts to government spending in what he termed "emergency" measures to balance next year's budget. The Argentine peso closed 3.14 percent weaker and is expected to face further pressure this week.

In Turkey, the Central Bank of the Republic of Turkey (CBRT) signalled that it would take steps to combat "significant risks" to price stability and also hinted of interest rate hikes. Investors have lost fait in the central banks independent authority — the TRY was trading down another 1 percent at $6.6920.

USD/INR hit a fresh record high as the pair approaches the $71.54 level. It's expected that state banks have been selling U.S. dollars on behalf of the Reserve Bank of India (RBI).

South Africa has officially entered a recession after this morning's GDP data. Q2 GDP annualized q/q: -0.7% vs. +0.6% estimate; y/y: +0.4% vs. +1.0% estimate.  The USD/ZAR moved up 2.25 percent at $15.2520.

In Europe, GBP/USD is lower for the fifth consecutive session, probing the lower end of the £1.28 handle as doubts continue to linger on Brexit negotiations and weaker U.K. PMI data.

5. UK PMI Data Continues To Miss Expectations

Data Tuesday morning showed that the U.K's latest purchasing managers' index on construction activity fell to 52.9 in August, well below July's 55.8 and below market expectations for a smaller fall to 54.9. Nevertheless, the index does remain in expansion territory.

Digging deeper, Markit reported a weak performance in housing activity, while civil engineering work decreased for the first-time in five-months. New business growth slowed, with Markit citing reports that Brexit-related uncertainty "continued to hold back investment spending."

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