Reversal of sentiment


Last trading hours of the Asian session were truly interesting. Shanghai fell almost 4%, along with CSI 300. China’s stocks fell from an 8-week high on heavy volumes. Trading volume was 68% higher than the 30% day intra-day average even though Hang Kong is closed for a holiday.

The question stays if that is just profit taking or a presidium to a bigger sell-off. Today;s sell-off was led by small-caps, the ChinNext slid almost 9%.The reversal of sentiment had a spillover effect on the FX market. AUD from the biggest winner during an early trading became the biggest loser now.

NZD is weak and the latest GDT auction provided a catalyst for resuming downward movement. Kiwi is the weakest currency in G10 right now, Fitch also cut Fonterra’s rating today. Europe opened higher but all bullish gaps were rapidly closed and bears pushed lower as the sentiment from the Asian session is visible palpable in Europe.

Latest DAX TA: here.Oil declined slightly during the Asian session as API’s report showed estimated change in oil stocks equal near +7 million barrels. While maintenance at refineries is to blame, a second large increase causes unease among investors. The official data is being published today at 3:30 pm BST by the US DoEThe Bank of Canada meeting is being held today at 3:00 pm BST. The bank currently has its main reference rate at 0.50% after a last cut in July this year. It’s very unlikely the BoC changes its rates and this is what market has priced in.

 PLN stays under heavy pressure with the Sunday’s election. According to Societe Generale, Law&Justice (first in polls) plans threatens Polish Central Bank Independence. Spokesman from Law&Justice announced a new upcoming credit programme similar to the one conducted by the ECB. The fact raised expectations of new dovish members to the Monetary Policy Committee, who would be likely to continue easing of monetary policy.