It is a sea of red on trader screens this morning with U.S. equity futures modestly lower on the last trading day of the month, after European and Asian shares fell following Trump’s latest comments on trade. Emerging Markets were hit again while Treasury yields drifted lower and the dollar rebounded from an early dip.
The deepening rout in the Turkish lira and Argentinian peso spread to other emerging markets, with the Indonesian rupiah dropping to the weakest level since the 1998 Asian financial crisis…
… and the Indian rupee sliding to a record low.
Caution has returned to markets as global stocks end a month that saw a solid rally from mid-August. While the Fed remains on its tightening path and Chinese authorities stepped in to stem declines in the country’s currency, the threat of global growth taking a hit from souring U.S.-China relations remains front and center, and continues to slam emerging markets the hardest.
After emerging markets initially ignored the slide in the Argentine Peso (and Turkish Lira), the correlation between the currency and the broader EM FX index has jumped, as the Argentine contagion has spread to the rest of the world following the latest shock plunge sent the currency to a record low.
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