OVERNIGHT MARKETS AND NEWS
September E-mini S&Ps (ESU15 -0.54%) are down -0.36% and European stocks are down -1.10% after China unexpectedly devalued the yuan by 1.9%, the most in two decades, which sparked a sell-off in emerging-market currencies, commodities and stocks with exposure to China. The move by the PBOC risks starting a currency war as global demand wanes and fuels speculation that central banks, including the Fed, will keep interest rates lower for longer. European stocks were also undercut after German Aug ZEW investor confidence unexpectedly fell to its lowest in 9 months. Asian stocks closed lower: Japan -0.42%, Hong Kong -0.09%, China -0.01%, Taiwan -0.86%, Australia -0.65%, Singapore -1.36%, South Korea -0.53%, India-0.84%. The action by China to devalue the yuan undercut most Asian equity markets on concern it will weaken exports of China's trading partners and slow their economies.
The dollar index (DXY00 unch) is up +0.09%. EUR/USD (^EURUSD) is up +0.15% at a 1-week high. USD/JPY (^USDJPY) is up +0.26%.
Sep T-note prices (ZNU15 +0.38%) are up +18 ticks as the slide in global equities boost the demand for government debt.
The PBOC unexpectedly cut the yuan's daily fixing by 1.9% today, the most since China ended a dual-currency system in 1994, which sent the yuan tumbling down to a 2-3/4 year low of 6.33 per dollar. The action by the PBOC is seen as weakening the yuan in an attempt to support exporters, although the PBOC said the change was a one-time adjustment.
The German Aug ZEW survey of expectations of economic growth unexpectedly fell -4.7 to 25.0, weaker than expectations of +2.2 to 31.9 and the lowest in 9 months.
U.S. STOCK PREVIEW
Key U.S. news today includes: (1) Q2 non-farm productivity (expected +1.6%, Q1 -3.1%) and Q2 unit labor costs (expected unch, Q1 +6.7%), (2) Jun wholesale inventories (expected +0.4%, May +0.8%), and (3) the Treasury's auction of $24 billion of 3-year T-notes.
