Comments from Fed's Dudley have sparked USD weakness as a sooner-rather-than-later rate-hike appears off the table. USD weakness drags USDJPY lower which in turn fun-durr-mentally slams US Stocks. September rate-hike odds slide to 26% from 28% yesterday...
Goodbye September rate hike. From the much anticipated Dudley Q&A:
- DUDLEY: CASE FOR SEPT RATE HIKE LESS COMPELLING
- DUDLEY: US DATA GOOD, BUT CAN'T JUST LOOK AT DOMESTIC DATA
Yes, have to also look at domestic stocks. TSYs jumping on the news, USDJPY flattish until the algos reverse the correlation trackers so tthey can push stocks higher on this latest admission of Fed policy failure.
Following last night's huge drawdown in inventories, according to API, The DOE data shows a huge 5.45mm bbl draw (against expectations of a 3.7mm bbl draw). This is the biggest draw since early June and 2nd biggest draw in 13 months. Production data showed a 3rd weekly drop in a row (4th of last 5 weeks) but of lesser magnitude. WTI crude's reaction was an initial surge to test API-spike highs but then weakness ensued as Fed's Dudley started speaking...
"Policymakers responded to the financial crisis with easy monetary policy and low interest rates. The critics — including us — argued against 'solving a debt crisis with more debt.' Put differently, we said that QE was necessary, but not sufficient for a recovery. We are now coming to the moment of reckoning: central bankers look naked, and markets have nothing else to believe in."
Perhaps the biggest market moving event of the day, more so than the Durables data, was Bill Dudley's speech. However, at least based on the prepared remarks there is no discussion of the economy. From Bloomerg. Now all eyes turn to the Q&A which is where any questions relevant to the recent move in markets will most likely emerge.
Yesterday, we highlighted what could well have been the catalyst for the collapse late in the session. SUNE has crashed in the last two days as the hedge fund hotel which boasts such guests as Greenlight, Third Point, Glenview, Lone Pine, Fir Tree, Steadfast, Omega, York, and Canyon, sees mass liquidations, and judging by this morning's 6% plunge in the face of a notably higher broad market, it appears the margin-call driven liquidation may be continuing if not accelerating.
Following The Dow's recent 'death cross' - when the 50-day moving average drops below the 200-day - it fell 2000 points. So will AAPL triggering its own 'death cross' warrant "no brainer" buying-the-dip or will investors remember what happened in 2012...
This is what we said on Friday afternoon when we reported that someone was aggressively bidding VIX 50 Sept calls: "what would be far scarier is if whoever is suddenly offering a nickel for the VIX Sept 50 calls actually knows something. Because if he "does", that would suggest a market move 'Straight out of Lehman.'" Fast forward to Monday, when we had a market move that was, drumroll, straight out of Lehman indeed, and shockingly, the VIX 50 calls, which were bought when the VIX was trading at half that value, were briefly in the money!
Take your pick - here's three good reasons to engineer a "crash" that benefits the few at the expense of the many.
Durable Goods Orders rose a better than expected 2.0% in July (but that is notably slower than the 4.1% revised growth in June). Non-defense Capital Goods growth remains stagnant as core capex orders have now been in deceline 6 straiught months year-over-year. Furthermore, on a non-seasonally-adjusted basis, YoY Durable Goods New Orders collapsed 20.4% - the worse level since the financial crisis as last year's Boeing orders outlier washes out of the numbers... but even ex-Transports the numbers remain recessionary-ugly.
Here We Go Again: US Equities Surge Even As Chinese Stock Market Rollercoaster Tumbles To 8 Month LowSubmitted by Tyler Durden on 08/26/2015 - 08:16
It seemed like finally China's relentless and increasingly futile attempts to have a green stock close would work: interest rate cuts, liquidity injections, direct stock interventions, even threats on the Prime Minister's head, and just to make certain moments before the close news very deliberately broke that government funds are buying large financial stocks, especially state-owned banks, to support the index, in the latest clear signs of government support, the Shanghai Composite seemed on pace to end an unprecedented series of consecutive tumbles which have dragged the composite down nearly 1000 points, or 25% in one week, and then... red close, with the SHCOMP down 1.3% to 2927, and a stunned China watching in horror as the central bank and government lose control, and everything they throws at the biggest market bubble of 2015 does absolutely nothing.
As the USD levitates along with Treasury yields, so Precious Metals are coming under significant pressure once again...
Following the most recent Chinese market rout, Deutsche's Jim Reid updates a chart he used back in early June comparing the Shanghai Composite recent performance with that of the NASDAQ back in 1999-2000.
- Global Stocks Struggle to Shrug Off China Fears (WSJ)
- Brief Respite Ends for European Stocks Amid Renewed Retreat (BBG)
- Stock futures rise after China injects $21.8 billion (Reuters)
- China turmoil needn't rattle BOJ, yen rise not a worry: Abe adviser (Reuters)
- Stock-Market Tumult Exposes Flaws in Modern Markets (WSJ)
- Dollar gains as stocks recover, lessens safe-haven bid for yen (Reuters)
... in the past two weeks alone China has sold a gargantuan $106 (and over) billion in US paper just as a result of the change in the currency regime!