Archive - Dec 5, 2012

To think it took a really ugly economic number, such as the Services PMI reported last night, to stir the Chinese stock market out of a hypnotic drift lower, and push it up by 2.7%. Why? Because in the New Normal bad economic news means hope that central banks get involved, and as we have explained the ongoing SHCOMP collapse is purely a function of the PBOC remaining on the sidelines. Last night, rumors (very unfounded and very incorrect) that the central bank would intervene put a stop to the drop. Sadly, as the PBOC has no intention of ending its ultra-short term reverse-repo driven market support strategy, the bounce will be very short lived. However, that coupled with more jawboning out of the BOJ that it would act, if it has to (whether under Abe or Noda), sent the JPY even weaker, and futures ramping on tiny overnight volume which wiped out all the previous day's losses.