Global stock indices declined, US stock futures shifted to a defensive stance for the first time in a while, and demand in the fixed income market increased following a series of reports indicating a reduction in Chinese trade (which consequently reflects a weakening foreign demand for Chinese goods and services), deteriorating profit prospects in Italy's financial sector (banks now subject to windfall tax), as well as issues in the US financial sector (Moody's downgraded US bank ratings due to rising funding costs and risks associated with commercial real estate-backed securities). This new wave of concern pushed equity futures down; S&P futures were down 0.8%, dropping to 4,500 points, and Nasdaq futures fell by 0.7%. Yields on 10-year Treasury bonds dropped by 10 basis points to 4%, while yields on German bonds with the same maturity decreased by 15 basis points.

The DXY dollar index surged by 0.6% to reach 102.70, resuming its movement towards the target range (103-103.50) after a brief bearish pullback:

Investor sentiment took a significant hit after China released additional data indicating that its economic engine is starting to falter. Exports declined the most since the beginning of 2020, the start of the COVID-19 pandemic, and imports contracted last month. Overseas shipments dropped by 14.5% in dollar terms last month compared to the same period the previous year, while imports contracted by 12.4%, according to the customs administration on Tuesday. This resulted in a trade surplus of $80.6 billion for the month. The Hang Seng China Enterprises Index and a gauge of European mining shares both fell by about 2%. Commodity prices declined, with oil and copper losing nearly 2%. 

China's disappointing economic recovery is being acutely felt among exporting nations in the developing world. The MSCI Emerging Market Index is on track to close at its lowest level in the past four weeks and is poised to breach the support level at its 50-day moving average. Its currency-index counterpart is also trading at its weakest level since July 10. 

The yen exhibited the most significant decline against the US dollar, with USDJPY preparing to test the 143.50 level, after which the target will be the early July high (145 level):

Today's macroeconomic data includes Small Business Optimism, Trade Balance, and Wholesale Sales/Inventories. Risk assets would benefit from a moderately weak US inflation report on Thursday to prevent the risks of stagflation due to other weak macroeconomic data from causing further sell-off on souring risk mood and making a slowdown in the pace of Fed tightening the main trading theme.