Archive - Dec 10, 2015 - Story

While the headline import price figure suggested there is some hope that import prices will improve at the headline level in the coming months, something else has emerged which suggests that the real importing of others' deflation is only just starting. Or rather, someone else. China.

It's a bad time to be in the commodities business. Crude is in a veritable tailspin as an increasingly disjointed OPEC ramps production to three-year highs and thanks to a worldwide deflationary supply glut, the Bloomberg commodities index is sitting near its lowest levels of the 21st century portending doom and gloom for prices across the entire commodities complex. On Thursday, we get the latest round of desperate cost saving measures as oil major ConocoPhillips slashes capex by some 25% and looks to raise $2.3 billion from asset sales.

Weak surveys, mass layoffs, and poor outlooks appear to have finally rippled through the government's data and sparked a significant rise in initial jobless claims. Up 13k to 282k, this is the highest claims since early July. Of course, it remains below the Maginot Line of 300k which 'proves' everything is awesome, but initial claims is now at the same level as it was when The Fed ended QE3. Perhaps more notable is the spike in continuing claims (up 3.8%) - the end biggest jump since 2008 to 3 month highs.

While the major indexes remain within arm’s length of their 52-week high, the number of stocks hitting new lows is piling up.

Whether Beijing is questioning Guo about his habit of eschewing investments in China in favor of deploying capital overseas or whether Fosun did something “wrong” in the markets during the selloff is hard to know, but one thing’s for certain: “kill the chicken to scare the monkey” is alive and well.

The latest confirmation that the oil cartel formerly known as OPEC is effectively non-existent, came a little over an hour ago when in its latest November monthly report, the Organization of Petroleum Exporting Countries reported that total monthly crude output for the member nations rose to 31.695 million barrels per day, the highest amount produced in three and a half years.

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After yesterday's rollercoaster session in both the S&P and in oil, where initially stocks soared alongside oil, only to promptly tumble as stops were taken out and as the refiners' inventory strategy was exposed after the DOE's latest weekly numbers were released, it has been a quieter session so far, though maybe not for China where stocks jumped at the open only to fizzle and close at the lows in what appears to be ever less intervention by the market manipulating "National Team."

For the 5th day in a row, Onshore Yuan has tumbled against the USDollar. Absent the violent devaluation in August, this is the largest drop since March 2014, leaving the Chinese currency at its weakest level against the USD since August 2011. It appears that after showing some signs of 'stability' to appease The IMF's political decision, and following the weak trade data this week, China has decided to escalate the currency wars, perhaps in anticipation of (or in an attempt to stall) any market turbulence when The Fed hikes rates next week and withdraws up to $800bn in liquidity from global markets.