China Raises Benchmark Rate By 25 bps

Tyler Durden's picture

China has raised its key interest rate by 25 bps, marking only the first time it has done so since announcing it has recovered from the global crisis. Undoubtedly, this is its response to not being labeled a currency manipulator. However, as the US will most likely never raise rates again, and with the Yuan still pegged to the dollar, unlike in a typical recovery, where this would signal the elimination of excess liquidity in an attempt to prevent inflation, this time it is a largely symbolic move. Nonetheless, this will put some serious pressure on Chinese stock markets, on the US futures, and will be very "positive" for the dollar, which ironically defeats the whole point of the exercise.

More as we get it.

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10044's picture

Knee jerk reaction in gold

Turd Ferguson's picture

Unhappy, unsatisfied and now fearful that their last three attempts to shake out longs and cause a cascade of selling in gold have failed, the Evil Empire has decided again today to take another stab at it. This time, they may be at least somewhat successful as this China news combined with euro weakness may be enough to rally the $ back to 79USDX.

Watch the area between 1345-55 very closely as a close below 1345 would be sufficient cause to believe that the 11-week rally from July is over and we have entered into a period of price consolidation.


eigenvalue's picture

Part of the Euro weakness is caused by the China news. China is not such a large mover as you might imagine. But as you have mentioned, precious metals do need some consolidation before they move higher.

Pegasus Muse's picture

Agree.  A little consolidation here would be welcome.  Folks need to acclimate to the higher altitude.

Turd Ferguson's picture

Well, there's the ole gold waterfall we've all gotten accustomed to over the years.

Where she stops, nobody knows...though 1330 would seem about right...for now.

Kaiser Sousa's picture

its all paper games though TF...aint nothing changed for either of the only 2 forms of real money "fundamentally"...who in this environment of debt coupon based currencies and sovereign's would be selling Physical Gold or Silver?  just more cartel crap cause they apparenetly still can drive down the phony paper price...

John McCloy's picture

Bank of America another round of joke earnings for all. Guy on Bloomberg after talking about how wonderful the EPS beat was decided to check to see how they beat earnings since and said,

"Oh it appears that there are less provisions set aside"

I love this stuff. Their revenues are down so how exactly are they growing to grow their business? Maybe people are beginning to understand that all those earnings of all banks from Bear, BAC to Lehman & GS were fictional and will never be created again since they were reliant upon nonsensical housing prices and securitizing garbage loans to sell off.

Imagine what BAC would look like if they were not on Fed welfare & IV line.Meanwhile Moynihan said, "Looks like things are improving"...ok bud why dont you grab yourself  a few more magic pixie mojitos and ride off into the sunset on your ride (posted Below).

trav7777's picture

I wish everyone would stop stressing over the "solvency" of the banks' balance sheets.

So it says they are negative a few billion or tens of billions of fiatscos; so what?  This is like a math problem where you can just make the equation work by plugging whatever you want on the other side, kind of like monetarism.

There is nothing REAL behind these numbers; they're just paper confidence units.  That is what this crisis is exposing, the transparency/incorporeality of our money.  For the past 40 years, we could pretend that it was sound and it was based on "the future" and right around the corner, we would make good on all the borrowing by subrogating real things in place of the debts.  Now, all pretenses are off.  So BAC operates with "negative" capital.  They never HAD any real capital to BEGIN WITH.  All ANY of these financial entities has is a balance sheet, where someone marks one pretend number in one column and another pretend number in another.

All any of the people care about is whether those units of account fetch them real yachts and real pussies and real gold toilets.  The game plays on for as long as that works.

Cdad's picture

Things are looking downright sporting this a.m.  BofA drops a steaming pile of quarterly, complete with a $7.7 billion "special", China makes a fundamental dollar move while Apple tries to decide if it's $400 or $200.

And it would all be fun if not for the fact that an escaped mental patient is currently driving the bus trying to hit 106 on the SPY without using the exit ramp.

When did this all become normal? 


eigenvalue's picture

It is just a symbolic move as Tyler has mentioned. Since China has such a large problem of local governments' funding platforms, it will be unconceivable for the Chinese central government to curb domestic inflation whole-heartedly. 

trav7777's picture

Gold takes a $15 vertical drop...

eigenvalue's picture

That's only 1%,dear... Thought you had stronger nerves.;-)

trav7777's picture

i'm not exactly freaking out over it.

woulda been nice to have a SLV or IAG short on tho...

pachanguero's picture

Nice buying the dips in PM.

trav7777's picture

what the fuck does the benchmark China rate have to do with ANYTHING?

ALL material credit origination there is done by STATE BANKS.  The interest rate, nominal profitability, EVERYthing, is IRRELEVANT.

China fucking prints money, simple as that.  So they are now supposedly charging .25% more on money that is lent at a loss from one State entity to another...whoopdie shit.

I marvel that people even care about these numbers and spend their days and lives running all these analyses over what at the lowest level is a confidence racket about how many angels can dance on a pinhead.

eigenvalue's picture

In China, there is a shadow lending market actually. The interest rates in this market is heavily influenced  by the official benchmark rates. As a result, the interest hike does have some effect...

eckart's picture

Stocks are down?! that's not supposed to happen!

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markmotive's picture

Bit of an overreaction by the USD, but it was overdue for a relief rally.

Of course, for non-US gold investors the dollar rally helps offset the decline in gold prices. About 85% of the baffoons I talk to forget that.


kaiserhoff's picture

This could be important.  A little read piece, last week, on China/Japan noted that Japan already spends one quarter of its budget on interest expense - IN A ZIRP WORLD.  If this leaks over into rising rates in Japan, the pace of change will accelerate.

                            What fools these mortals be.

                                      Viscount Bolebec

mark456's picture

Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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