Morning Commentary: China’s troubles continue to take a toll on preferred stocks, broader markets

By Stephanie N. Rotondo

Seattle, Jan. 7 – The preferred stock market was trading off again on Thursday, though perhaps not as much as some had expected.

“I thought we would see a little more of a shakeup after China last night,” a trader said, referring to the nation’s second market halt of the year. “There should be a greater risk-off trade going on. The second biggest economy hitting its circuit breakers twice in a week plus [the devaluation of the yuan] should be a bigger deal than it is.”

“But there’s nothing to see here...yet,” the trader said. “But I think there will be.”

The Wells Fargo Hybrid and Preferred Securities index was down 21 basis points at mid-morning. On a broader basis, the Dow Jones industrial average and S&P 500 index were down under 1%, though the Nasdaq was off more than 1% in early trading.

Domestic crude was off nearly 2.5%.

In early preferred dealings, Morgan Stanley & Co. Inc.’s 6.25% capital securities (NYSE: MWR) were down 2 cents at $25.56, while Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were 3 cents weaker at $26.51.

HSBC Holdings plc’s 8% exchangeable perpetual subordinated capital securities (NYSE: HSEB) continued to trend in line with the market, falling a nickel to $26.11.

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