By Lorcan Roche Kelly
The Argentine peso tumbled as much as 25% to a record low of 60 per dollar yesterday, with the country’s main stock index plunging by the second-largest amount of any benchmark in any country since 1950, as investors retreat in the wake of President Mauricio Macri’s stunning defeat in primary elections over the weekend. Alberto Fernandez, the winner in that vote, criticized Macri for increasing short-term debt to unsustainable levels, while adding he does not want to default on the nation’s obligations. That was not enough to stop yields on shorter-maturity notes hitting 35%.
Departure gates at Hong Kong’s airport were closed again today as protesters occupied terminals at the building. Cathay Pacific Airways Ltd., which has become something of a focus for Chinese ire at the protests after some of its employees joined the demonstrations saw its shares hit again, and its rating cut to a “strong sell” by the investment arm of China’s biggest lender. Hong Kong’s Chief Executive Carrie Lam warned the unrest risks tipping the city into “an abyss.”
The downturn is here
Signs of a global slowdown are everywhere to see today. Singapore’s government cut its growth outlook to 0-1% from 1.5-2.5% this year, showing how the U.S.-China stand-off is hitting the region’s most trade-reliant economies. In Europe, the ZEW expectations figure for investor confidence dropped to -44.1, the lowest since 2011. In the U.S., the rate on the 30-year Treasury bond is closing in on an all-time low as investors seek shelter from what seems to be a rapidly worsening global outlook.
Overnight, the MSCI Asia Pacific Index dropped 1.2%, while a strong yen saw Japan’s Topix index close 1.2% lower, enough to wipe out the gauge’s gains for the year. In Europe, the Stoxx 600 Index was 0.6% lower at 5:50 a.m. Eastern Time with industrial and automaker shares the biggest drags in the region. S&P 500 futures pointed to further losses at the open, the 10-year Treasury yield was at 1.628% and gold’s rally continued.
Headline U.S. inflation is expected to edge up to 1.7% in July, with the core reading holding steady at 2.1% when the numbers are published at 8:30 a.m. The New York Fed releases the second-quarter household debt and credit report at 11:00 a.m. In corporate news, JD.com Inc. and Tilray Inc. report earnings, while PG&E Corp. is scheduled to receive a judgement on whether it will be able to retain sole control of its Chapter 11 process.