How spooked will Wall Street be today following a 6.5% dive in the Shanghai Composite Index overnight? That's the $64 question this morning. S&P futures are indicating that we're going to see a knee jerk lower at the open. Thus far, declines in Europe are limited to dips of no more than around 1%. Developments in the Chinese market will need to watched closely since a sharper unwind in their markets will have negative global repercussions. The Goldman Sachs Macro report, I'm told, this morning suggests that hedging with Dec Eurodollar calls vs S&P puts is the better way to go - fyi.
The Chinese market dive was brought on by an increase in a tax on trades by the Chinese government from .1% to .3%. The tax increase is part of what is seen as a series of measured responses by Beijing to cool rampant speculation. Prior to last night's swoon, the Shanghai benchmark was up 62% year to date. While it's all well and good for the Chinese government to be 'measured', there's still plenty of risk that they push too hard to cool things and cause a classic boom/bust scenario that will hurt global equity markets.
The ADP employment report indicates that Friday's official payrolls data could be a bit softer than what economists are expecting: U.S. private payrolls up 97,000 in May: ADP. Earlier, the Mortgage Bankers reported softer activity: US mortgage applications fell last week-MBA. At midday we'll see the minutes that were taken at the last FOMC meeting.
Is ICE gaining the upper hand in the battle for Chicago Board of Trade? ICE signs exclusive deal with CBOE.
Crude oil, dollar, bonds little changed. Gold down $2.