It was a tale of two markets overnight: Asia first - where all commodity hell broke loose - and then Europe (and the US), where central banks did everything they could to stabilize the already terrible sentiment. Asian markets were a bloodbath as we covered previously, with China's Shanghai Composite sliding 2%, even as some big-cap marquee names plunged, but the one stock everyone was focusing on was Singapore-listed Noble Group (SGX:N21), which as we explained previously is Asia's largest commodity trader and thus the continent's "Glencore", whose CDS blew out overnight, its 2020 bonds crashed to record lows and stock plunged as much as 15% before closing down 10% on Glencore - and commodity - counterparty risks and general liquidation concerns. This was broadly in line with the mauling of Australian miners which as we showed previously, also plunged overnight as the commodity liquidation ripple effects are starting to be felt virtually everywhere. Another market that was not spared was Japan, whose Nikkei225, trading at nearly 21,000 just one month ago, crashed by over 4%, to close below 17,000 for the first time in 2015. In fact, despite persistent Japanese liquidity injections, the Nikkei has now wiped out all its gains for the year. Those Japanese pensioners must feel really good right now about selling "safe" JGBs and investing their retirement funds into risky assets which are now down for the year, even as the world's biggest pension funds are now out of dry powder to push the Japanese stock market higher. It wasn't just China and Japan: tumbling resources stocks dragged Australia’s S&P ASX 200 to a two-year low. The benchmark fell 3.8%, its biggest one-day move in a little over a month. The rout also lit a fuse under Asian currencies and commodities, which also plumbed fresh lows, with Malaysia’s ringgit falling as much as 1.2% against the U.S. dollar to yet another 17-year low while Indonesia’s rupiah touched 14,730 against the U.S. dollar, a fresh 17-year low. Industrial metals including zinc and copper fell to multiyear lows. And then, just as all hope seemed lost, it was as if India's RBI head Rajan heard our "plea" from yesterday evening... We may need an emergency central bank announcement in next 48 hours — zerohedge (@zerohedge) https://twitter.com/zerohedge/status/648673161517604864!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0],p=/^http:/.test(d.location)?'http':'https';if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src=p+"://platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs"); .... and instead of cutting the Reserve Bank repurchase rate by 25 bps as everyone had expected, the RBI decided to ease that much more aggressively, and cut by 50 bps, as just 1 out of 52 economists survey by Bloomberg expected. This announcement catalyzed a dramatic move in the all important USDJPY, which after sliding to a low of 119.250 overnight just after the RBI surprise announcement, started its usual dramatic levitation to the 120 "tractor" point, and around 5am Eastern, the latest central bank intervention to stabilize the market selloff succeeded, with the key carry pair trading within a fraction of the magical support level that is so instrumental to keep stocks bid. Despite opening lower across the board in reaction to lower close over on Wall Street and overnight in Asia, stocks in Europe also gradually edged higher (Euro Stoxx: -0.1%), as market participants used the recent selling pressure as an opportunity to reinstate longs. In particular, shares of the troubled trading and mining company Glencore (+8.7%) surged higher, with analysts at Citi noting that the recent price action is somewhat exaggerated and that the company should go private if fall in share price continues. In terms of fixed income, the release of lower German state CPIs failed to support Bunds and instead the price action was dominated by stocks-specific recovery in sentiment, with the US and German benchmarks both heading into the North American crossover relatively flat. End result: after sliding first thing in overnight trade, both European stocks and US equity futures are now trading near their highs, with the E-mini last seen around 0.5% higher on the session, even pushing up Volkswagen stock, which was deep in the red earlier, to virtually unchanged on the session, while suddenly all-important Glencore, was up 5% at last check even as its CDS keep soaring to new all time highs. Clearly equity investors - and their hopelessly wrong "advisors" - want to the delusion to continue at least a little longer... ... even if the bond market already knows how this sad story is going to end. In FX, the abovementioned unwind of safe-haven flows saw USD/JPY retrace overnight losses and move into positive territory, while carry related flows saw EUR/USD move into the red . As a result, GBP outperformed its major counterpart, also benefiting from an encouraging UK macroeconomic releases, which showed that UK mortgage approvals rose to its highest level since Jan'14. Elsewhere, with Glencore (GLEN LN) shares rebounding today after days of heavy selling, commodity sensitive currencies such as AUD and NZD have also staged a modest bounce, with energy prices also in positive territory. Finally as also noted, the RBI cut rates by more than expected overnight , which saw strength go through the Sensex index and as such supported the INR. Indian RBI Cash Reserve Ratio (29-Sep) M/M 4.00% vs. Exp. 4.00% (Prey. 4.00%) Indian RBI Reverse Repo Rate (29-Sep) M/M 5.75% vs. Exp. 6.00% (Prey. 6.25%) Indian RBI Repurchase Rate (29-Sep) M/M 6.75% vs. Exp. 7.00% (Prey. 7.25%) In commodities, WTI heads into the NYMEX pit open in positive territory, bolstered by the weaker USD while the metals complex continues to be weighed upon by global slowdown concerns, with platinum notably underperforming due to its use in catalytic converters in diesel engines. This comes after UBS today forecast the effect of VW emissions scandal would be 'positive' for palladium and rhodium and 'net negative' for platinum. Today's highlights include latest US Case-Shiller housing data, the September consumer confidence report and API crude oil inventories after the closing bell on Wall Street . Overnight Bulletin Summary from RanSquawk and Bloomberg Despite opening lower across the board in reaction to lower close over on Wall Street and overnight in Asia, stocks in Europe have pared most of the losses ahead of the North American crossover In terms of fixed income, the release of lower German state CPIs failed to support Bunds and instead the price action was dominated by stocks-specific recovery Looking ahead, today sees US consumer confidence report and API crude oil inventories after the closing bell on Wall Street Treasuries steady, 10Y yield holds near lowest since late August, amid signs of stabilizing in commodities and global equity markets. India’s central bank cut the benchmark repo rate to 6.75% from 7.25%, lowest since May 2011, a move predicted by only one of 52 economists in a Bloomberg survey, as the commodity rout contains inflation, China slowdown threatens global growth The lone economist who predicted the RBI’s oversize rate cut says the bank will ease another 50bp by March as inflation undershoots target China’s red-hot corporate bond market may be the country’s next asset bubble after the stock rout, according to financial companies surveyed by Bloomberg Li Shulei, a senior analyst at China Bond Rating Co., said China National Erzhong Group Co. has defaulted on an interest payment that was due Monday after a local court accepted a restructuring request from one of its creditors last week Glencore Plc, which fell as much as 31% yesterday, was 9% higher in London; Citigroup Inc., which helped the co. to list in 2011, said CEO Ivan Glasenberg should take the co. private if the stock market doesn’t stop hammering the shares Germany pared bond issuance for the second time this year, even as Merkel’s Cabinet met Tuesday to consider extra funding of at least EU6.7b ($7.5b) to help as many as 1 million asylum seekers forecast to arrive this year Europe’s repo market barely grew in the 18 months through June 10 with the total value of outstanding contracts at EU5.6t ($6.3t), according to the ICMA Euro-area consumer confidence rose to 105.6 in Sept., higher than forecast, from a revised 104.1 in August, the European Commission said $1.7b IG priced yesterday, no HY. BofAML Corporate Master Index widens to +174bp, new YTD wide and widest since Sept. 2012; YTD low 129. High Yield Master II OAS widens +33 to new YTD wide +648, widest since June 2012; YTD low 438 Sovereign 10Y bond yields mixed. Asian stocks fall led by Japan; European stocks mostly lower, U.S. equity-index futures gain. Crude oil, copper gain, gold lower US Event Calendar 9:00am: S&P/Case-Shiller 20 City m/m, July, est. 0.1% (prior -0.12%) S&P/CS Composite-20 y/y, July, est. 5.15% (prior 4.97%) S&P/CS 20-City Index NSA, July, est. 182.5 (prior 180.88) S&P/CS US HPI m/m, July (prior 0.09%) S&P/CS US HPI y/y, July (prior 4.49%) S&P/CS US HPI NSA, July (prior 173.84) 10:00am: Consumer Confidence Index, Sept., est 97 (prior 101.5) 11:30am: U.S. to sell $10b 4W bills DB concludes the overnight event wrap The VW headlines continue to bubble away and it looks set to be a story which has some legs to run for a while, but yesterday’s focus for markets and the latest to spark a decent leg lower for risk assets came from heavy losses out of Glencore. Seemingly sparked by a negative broker report suggesting amongst other things that the company may need to do more restructuring than it has already announced should commodity prices not improve, and also that its equity could be close to worthless in such a scenario, the mining group saw its share price tumble 29.4%, cash benchmark spreads widen 377bps (with cash prices falling 10pts). There were also reports emerge of CDS traders starting to demand upfront payments to protect against default. That kick started a material wave of selling across European miners and resulted in the Stoxx 600 closing the session down -2.21% with the likes of Anglo American, BHP Billiton, Rio Tinto and Antofagasta seeing declines of at least 5%. European credit buckled also with Main and Crossover widening c.8bps and 27bps respectively. The negative tone carried over into the US session with the S&P 500 tumbling 2.57% (led lower again by healthcare names) and falling for the fifth consecutive session, on track now for its worst quarter since 2011. CDX IG closed nearly 4bps wider with a number of issuers said to postpone potential primary issuance in light of the volatility. The negative tone across risk assets meant we saw a decent bid across DM sovereign bonds however with 10y Treasury and Bund yields down around 6bps to 2.10% and 0.59%, respectively. Yesterday’s sharp moves seemingly overshadowed events elsewhere in markets, although we did hear from contrasting Fed speakers with Dudley and Williams reiterating Fed Chair Yellen’s view that the Fed will probably raise rates this year, while at the more dovish end Evans urged patience and suggested that a mid-2016 timeframe might be more appropriate. Before we look more closely at that, it’s straight to Asia to see how markets are behaving after yesterday’s sell-off. Not surprisingly the risk-off theme is extending into the overnight session in Asia with investors very much on the back foot this morning. Key equities, credit and FX readings are mostly in the red. The Shanghai Composite, Hang Seng, HSCEI and the Nikkei are down 1.8%, 3.4%, 3.8% and 3.5%, respectively as we go to print. The shares of commodity-related names such as Noble and Mitsui & Co are down -11%, and -9%, respectively. In credit, the Asia and Australia iTraxx indices are around 15bp and 10bp wider, respectively while high quality corporates anywhere between 10-15bp wider on the day. The MYR, IDR and KRW lost around 1.1%, 0.3% and 0.5% against the Dollar. Brent is little changed at around $47/bbl, UST 10yr around 1.5bp lower at 2.08%, while Copper is down for the third consecutive session. More on yesterday’s markets volatility was clearly evident via a decent leg up in the VIX. The index closed up +17% and has now finished above the 20 mark for the past 26 sessions, which marks the longest stretch since January 2012. There was also decent weakness across much of the commodity complex. WTI and Brent finished some 2.5% lower, while Gold tumbled over a percent and the rest of the precious space declined some 2-3%. Elsewhere, commodity-sensitive currencies tumbled, led by a fresh decline for the Brazilian Real which fell over 3%, while there were declines of at least 1% for currencies in Russia, South Africa and Colombia. Meanwhile, much of the outperformance was in Spain where 10y yields closed down 11bps and the IBEX, while falling -1.32%, outperformed the bulk of other European markets by some 1.5% after investors took comfort from the Catalonia election result on the weekend. Looking closer at the fallout from Glencore across credit markets. In terms of the wider implications of this move, Glencore did seem to weigh on the rest of the basic resource bonds in the EUR IG market with Anglo American’s bonds widening 134bps on the day with basic resource bonds excluding Glencore and Anglo just 10bps wider. Looking at yesterday's moves it’s interesting to note that EUR non-financial IG bond spreads excluding basic resource bonds were on average just 4bps wider on the day suggesting the notable Glencore and basic resource bond moves didn’t have an obvious effect on broader EUR non-financial credit market price action. Moving on and switching our attention over to the Fed, it was Dudley who we first heard from in comments which largely echoed Yellen last week. Although noting that his expectation on timing was ‘not calendar guidance’ and instead ‘depends on the data’, the NY Fed President said that ‘my expectation is that we probably will raise interest rates later this year’, citing confidence that the inflation target will be hit sometime next year. This was followed by a much more dovish tone from Chicago Fed President Evans who said that while the Fed is getting closer to liftoff, still noted that he has mid-2016 in his projections. In particular Evans noted that in his view it will be around that time that ‘the headwinds from lower energy prices and the stronger dollar dissipate enough so that we begin to see some sustained upward movement in core inflation’. Meanwhile and speaking after markets closed, San Francisco Fed President Williams reiterated his call for liftoff sometime this year, although noted risks to this from dollar appreciation and stuttering growth abroad. The dataflow yesterday seemingly took a bit of a backseat to headlines elsewhere but in truth there was little to move the dial. August readings for personal income (+0.3% mom vs. +0.4% expected) and personal spending (+0.4% mom vs. +0.3% expected) were mixed, while the PCE deflator (+0.3% yoy) and core (+1.3% yoy) came in as expected with the latter nudging up one-tenth from July. Disappointing data came in the form of pending home sales which fell 1.4% mom (vs. +0.4% expected) last month, resulting in the annualized rate dropping five-tenths to +6.7% yoy. Finally, the Dallas Fed manufacturing activity index for September (-9.5 vs. -10.0 expected) rose 6.3pts from the August reading, supported by improvements in the new orders component. Looking to the day ahead now, we have Spanish and German September inflation reads, both of which are expected to fall (to -0.7% YoY and 0% respectively) likely providing additional oxygen to the “will the ECB do more” debate. We also have the Spanish August retail sales growth read (which is expected to fall to +3.2% YoY from +4.2% YoY) and the broad set of Euro area confidence reads for September (all expected to remain relatively stable). BoE Governor Mark Carney will also give a speech this evening as will the ECB’s Weidmann. Over in the US we have the September consumer confidence read, which is expected to fall after the August bounce, the latest S&P/Case-Shiller Composite read which is expected to show the rate of house price rises picking up to +5.15% YoY and also Japanese PM Abe will be talking in New York.