Archive - 2016 - Story

A funny thing happened at 1101ET. Amid the deep plunge in stocks, 'someone' suddenly traded an enormous block of e-mini S&P futures which appeared to stall the sell-off (for now). This followed a similar (but smaller) block trade at 1042ET which also extracted all the liquidity from the market momentarily and enabled a brief rally.

On the heels of a tumultuous weekend that saw Saudi Arabia cut diplomatic ties with Iran after the Saudi embassy was torched by protesters angry at the execution of a prominent Shiite cleric, CDS spreads for the kingdom have blown out to six-year wides while the implied odds of the riyal peg finally breaking are hitting new record highs.

Dispppointing drops in China and US Manufacturing PMIs, combined with a record glut, appears to have trumped Mid-East tensions and sent WTI plunging back into the red. This has triggered another round of selling in US equities, sending The Dow down 450 points and back to a "16" handle...

If the market closes here, that would make it a worse first day of trading than in such "dramatic" years as 2008 and 1933. But wait, there's more, because unless the S&P somehow manages to stage a rebound and closes above the current levels, it would suffer the worst opening day loss in the past century except for the historic -8.1% collapse it suffered on January 4 of 1932.

A lot of people were expecting some really great things to happen in 2015, but most of them did not happen.  But what did happen? A global financial crisis began during the second half of 2015 threatens to greatly accelerate as we enter 2016. This is what the early stages of a financial crisis look like, and the worst is yet to come.

This morning, the headlines surrounding what's quickly mushroomed into a Mid-East melee are coming fast and furious and in the latest escalation, the Saudi foreign ministry says the kingdom will now cut all commercial ties with Iran.

Following China's disappointing drop in Manufacturing PMI overnight, this morning started off poorly with Canada's PMI crashing to its lowest reading since records began at 47.5. Then US Manufacturing PMI tumbled to 51.2 - its lowest print since October 2012 (with US factory orders collapsing to weakest since 2009). But The ISM Manufacturing crashed to 48.2 (deep in contraction) - the weakest level since June 2009, with employment bumping along at its lowest level since September 2009 and imports (reflecting domestic demand perhaps) crashed to levels only seen twice in 20 years.

Markets have started 2016 with a healty dose of turmoil, and so many were wondering how long - and who - would be the first central bank to intervene in either directly or verbally in markets. Moments ago we go the answer when Sweden's Riksbank announced it has held an extraordinary monetary policy meeting in which it took the decision required to be able to "instantly intervene on the foreign exchange market if necessary, as a complementary monetary policy measure, to safeguard the rise in inflation."

Having been halted down around 7% overnight, China's CSI-300 index is extending its losses in US trading as ASHR (the CSI-300 tracking ETF) is down 9% - its biggest drop since the August collapse. This plunges Chinese stocks to 3-month lows...

The S&P 500 is down over 2% at the cash open - with FANTAsy stocks collapsing 5-8% - flirting with the crucial 2,000 "mission accomplished" level. Here are the short-term support levels..

Something unexpected happened on the road to the latest Greek "recovery": the local population no longer believes one is coming.

It appears the FANTAsy stocks (Facebook, Amazon, Netflix, Tesla, and Alphabet) are suffering this morning as investors choose not to rush to the safety of triple-digit P/E ratios amid the market's collapse. Tesla is tumbling on burning-car concerns and Netflix is dropping after another downgrade. The rest are all ugly as it seems faith in FANTAsy is failing...

With markets wrapped up for 2015 now, reviewing the performance of asset classes last year shows that it was one where negative asset class returns were aplenty, while those finishing in positive territory were few and far between. Indeed, of the 42 assets we monitor in Figure 5, just 9 finished with a positive return in Dollar-adjusted terms over the full year.  At the other end of the scale there were some notable losers.

“Play it again. I love the feel of it"...