Archive - Aug 2015 - Story

"Regional buyers need a lot of conviction to step in front of this speeding train [especially] in context of a rapidly changing economic environment."

S&P FUTURES AT DAY’S LOW, FALLING 61PTS OR 3.1%
NEW LOWS FOR NASDAQ FUTURES, DOWN 195PTS OR 4.6%
NEW LOWS FOR DOW FUTURES DOWN 533PTS OR 3.2%
EUROPE’S STOXX 600 FALLS 5.3%, WORST ONE-DAY DROP SINCE 2011

• Deutsche Bank Says Rout ‘Very Serious’ as Growth Outlook Dims (BBG)
• Great fall of China sinks world stocks, dollar tumbles (Reuters)
• Global Stocks Fall Sharply Amid Concerns About the Chinese Economy (WSJ)
• Stock Rout Spreads Through Europe After China Plunge (BBG)
• China stocks give up year's gains as 'national team' stays on bench (Reuters)
• The Fed Is Looking at a Very Different Dollar Than Wall Street (BBG)
• French train gunman 'dumbfounded' by terrorist tag (Reuters)

• Risk averse sentiment dominated the price action overnight, with Chinese equities (Shanghai Comp -8.5%) again under heavy selling pressure as market participants were left disappointed by the lack of action by the PBOC to ease monetary conditions further. 
• US data is set to remain in focus as participants continue to try to gauge the possibility of a September rate lift off after last week’s Fed’s minutes highlighted concerns over China
• This week sees the first preliminary August CPI readings in Europe from both Germany and Spain

We warned on Friday, after last week's China rout, that the market is getting ahead of itself with its expectation of a RRR-cut by China as large as 100 bps. "The risk is that there isn't one." We were spot on, because not only was there no RRR cut, but Chinese stocks plunged, with the composite tumbling as much a 9% at one point, the most since 1996 when it dropped 9.4% in a single session. The session, as profile overnight was brutal, with about 2000 stocks trading by the -10% limit down, and other markets not doing any better: CSI 300 -8.8%, ChiNext -8.1%, Shenzhen Composite -7.7%. This was the biggest Chinese rout since 2007.

The last three times inflation expectations tumbled this low, the Fed was about to launch QE1, QE2, Operation Twist and QE3.

Germany's DAX is now down 15% since the "China doesn't matter" devaluation began with most European borses down 3-5% from Friday's close as the day started off with a modest bounce only to test new lows. EURUSD is now up 500 pips in 4 days back to 7 month highs. European bond risk is surging with Portugal up 50bps since China's debacle began. And finally crude continues to get battered, now testing the $38 handle for the first time since Feb 09.

But... but... pension funds are "allowed" to buy stocks. Judging by the first few minutes of trading in the first thing to open this evening on the mainland, the CSI 300 Index Futures which immediately tumbled by 4% to 3340, China's attempt to deflect attention from the fact that it did not do a 50-100 bps RRR cut is not doing too well.

Moments ago, without any specific catalyst, US equity futures just plunged when in thin, illiquid tape, a seller took out about 30 consecutive bid levels and as of last check, the ES was down as much as -48 to just 1923, or 2.5%, after being down a modest -13 minutes ago.

Three weeks ago, "something just snapped." Now, it is getting worse by the day.

Remember trade #2 from Goldman's list of top trade recommendations for 2015, the one which said "10-year US Treasuries  above 3% but not below 2% in  mid-2015, through cap and floor spreads at zero cost."  Um, yeah.... well, moments ago the 10Y just dropped below 2% for the first time since April.

"Clearly, markets have lost faith in the ability of unorthodox monetary policies to kick start the economy over time. This also fits the findings of academic literature suggestion diminishing returns from subsequent rounds of QE."

"The head of a Chinese exchange that trades minor metals was captured by angry investors in a dawn raid and turned over to Shanghai police, as the investors attempted to force the authorities to investigate why their funds have been frozen."

After the Bloomberg commodity index crashed overnight, having tumbled for each of the past 4 years, this happened: BLOOMBERG COMMODITY INDEX SLIDES TO LOWEST LEVEL SINCE 1999

Said otherwise, the lowest level in the 21s centiry.  Yup, rate hike any minute now.

Anyone who listens to a mainstream media pundit, talking head, or spokes bimbo deserves the reaming they are going to receive.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises