As Chinese Credit Plummets US Stocks Soar On Hopes Of More PBOC Easing; But Is Conventional Wisdom Again Wrong?Submitted by Tyler Durden on 08/13/2014 22:19 -0400
Conventional wisdom, now so habituated to getting all the cheap credit it can get, did not anticipate such a dramatic collapse in Chinese credit last month, is eagerly expecting a proportional response from the PBOC, one which would potentially involve significant easing, which is precisely what US equities priced in today when they closed near the highs of the day, even as there was not a single piece of good macroeconomic news overnight. Pretty cut and dry right? Well not really. Recall that as we reported in the last week of July something odd was revealed: namely that China quietly unveiled and implemented its Pledge Supplementary Lending line, or as it is increasingly better known: China's QE.
UPDATE: *BRAZIL PRES. CANDIDATE CAMPOS DIES IN PLANE CRASH: GLOBONEWS
Brazil's stock market is reeling this morning as rumors and now news hit that Brazilian Presidential candidate Eduardo Campos was on board a private jet that crashed in the city of Santos. Polls had put Mr. Campos head-to-head with Ms. Rousseff (but behind Ms. Silva). A police official in Santos said there were "certainly" fatalities in the crash, but could not say how many or provide any additional information. Campos had run on a platform of less government intervention and proposed a bill to ensure central bank indpendence.
If it was crashing German business confidence yesterday setting the somber mood for European economic "growth" in the second half, with a European GDP decline if not outright contraction now almost practically inevitable, then overnight it was disappointing data from virtually every other spot in the globe (and Europe again) to hammer the message in, starting with a historic 6.8% drop in Japanese GDP driven by a record plunge in consumption, quickly followed by total social financing out of China which in aggregate rose by only RMB273.1bn in July, or just 18% of what was expected, with missing industrial production and retail sales just the cherry on top. Then it was Europe's turn again, where June Industrial Production contracted -0.3% on expectations of a 0.4% increase, to set the stage for tomorrow's Eurozone GDP print which, following Italy's triple-drip recession shocker last week, probably means it will be not only Japan but also Europe which are about to have taken a sharp move for the worse. All of which of course, explains why just as Europe opened, the USDJPY blasted off and took both EuroSTOXX and US equity futures higher with it, and at last check ES was some 10 higher.
If the global equity "markets" were in need of a sharp "horrible news is great news" boost overnight, it came courtesy of Germany's ZEW investor confidence survey, which printed at a stunning 8.6, a plunge from the 27.1 in July and far below the 17.0 expected - the lowest print since December 2012 -largely suggesting that a European triple-dip is all but assured. And if that wasn't enough, strong language from John Kerry, assured to fan the flames of geopolitical instability, came hours ago when the US SecState said even more Russian sanctions may be coming. And just to make sure the NY Fed trading desk has to come up with a new narrative is the latest development in the Russian "humanitarian convoy" saga, which as we reported last night, has departed Russia but which Ukraine is now refusing to allow into its country. All in all, it's is setting up to be another super bullish day in the rigged markets for which all that matters is... Tuesday.
According to yesterday’s Wall Street Journal, the bailed out financial criminals at Goldman Sachs are set to launch the latest and greatest toxic derivative product directly into the portfolios of willing muppets the world over... and it all starts this September. Yes, it’s called the “Fixed Income Global Structured Covered Obligation,” (ironically close to the acronym FIASCO) and no, you will not have a clue what’s in it. No seriously, you won’t have a clue.
At the start of the year, Russia said 'nyet' to 132 Japanese cars imported through Vladivostok due to high radiation levels. Fast forward seven months and as AutoWeek reports, it appears the Japanese are up to their old tricks - desperate to make Abenomics look like it's working by jamming exports higher - a total of 70 used cars imported from Japan and found to have increased levels of radiation are being stored in Bishkek, Kyrgyzstan. The import of used Japanese cars is big business in Central Asia, especially in Mongolia and the Russian far-east regions, but several batches of cars have been seized by the government during the last three years - despite 'agreements' from Japan.
Despite the early volumeless lift, helped by USDJPY, it appears stock investors began to get the hint that the US economy (Stan Fischer), Iraq (coup), Ukraine (Russian will do it anyway), and Israel are not all fixed. Bonds rallied modestly early on ignoring the equity bounce and then as Europe closed (and a few Ukraine and Iraq headlines of reality hit), stocks leaked back off their highs. Treasuries end the day unchanged (5Y -1bps), Silver popped 0.75% back above $20, copper and oil modestly higher and gold down small to $1310. FX markets appeared quiet (USD ended practically unchanged) but EUR weakness was offset by CAD and SEK strength. S&P futures volume was 40% below average.
Deja vu all over again. Just as he stole the jam from the market's donut last week, NATO Chief Rasmussen has done it again:
NATO'S RASMUSSEN SEES "HIGH PROBABILITY" THAT RUSSIA COULD INTERVENE MILITARILY IN EASTERN UKRAINE
He also adds he sees no sign of troop withdrawal. So, despite the market's confidence that it's fixed and Putin has folded, it seems NATO is not so sure. Un-De-Escalation begins.
Remember last Monday - the day after Banco Espirito Santo was bailed out and Europe was fixed... before the world's geopolitical chaos rotated to aa on the Spinal Tap amplifier of doom - well US equity futures have levitated on de minimus volume, with the help of AUDJPY, to last week's highs. And all that before Rasmussen threatened Russia, US unleashed airstrikes and Russia stopped its military drill. Treasuries are 0-1bps higher in yield. Silver and oil are rising notably.
While Einstein defined insanity as repeating the same behavior and expecting different results, it appears President Obama's administration defines that action as US foreign policy. Just as they did in Syria (where the US 'trained' moderate Al Qaeda terrorists, instead of "sending troops" - ensuring no 'boots on the ground' blowback), AP reports that the US is sending arms to the Kurds as their new proxy mercenary force in Northern Iraq. We are sure the result will be different this time?
Since there is nothing on today's data docket, it will be all about, you guessed it, geopolitical risks, where "consensus" is best summarized by these two Bloomberg headlines:
- Stay USD Long as Geopolitical Risks Loom
- USD is mixed and world stock markets rise as concerns over geopolitical risks ease
That pretty much covers it, although in addition to the Ukraine civil war one can now add an Iraq coup to the list of geopolitical fiascoes instigated by US foreign policy.
Overview of the investment climate and the likey impact from data and events, delivered in dispassionate, even if dry prose.
The failure to understand money is shared by all nations and transcends politics and parties. The destructive monetary expansion undertaken during the Democratic administration of Barack Obama by then Federal Reserve chairman Ben Bernanke began in a Republican administration under Bernanke’s predecessor, Alan Greenspan. Republican Richard Nixon’s historic ending of the gold standard was a response to forces set in motion by the weak dollar policy of Democrat Lyndon Johnson. For more than 40 years, one policy mistake has followed the next. Each one has made things worse. What they don’t understand is that money does not “create” economic activity.
Gold Breaks Out As Tensions In Middle East, With Russia Intensify - Technicals and Fundamentals PositiveSubmitted by GoldCore on 08/08/2014 17:06 -0400
Gold is nearly 2% higher this week and its technical position has further improved (see key charts). On Wednesday, gold broke out of bullish descending wedge chart pattern that has formed in recent months. Another buy signal for gold came when gold rose above the 20 EMA and 50 EMA (exponential moving averages). Also positive is the fact that the price momentum oscillator (PMO) has turned up, indicating that a positive momentum shift has occurred.
We've largely ignored geo-political risks, ignored a slowdown in European growth, ignored the fact that Germany is deteriorating fast while increasing the amount of risk we take. That's the view of Saxo Bank's Steen Jakobsen who exclaims in this brief clip that "the market is so one sided and complacent," he feels a need to scream. Steen is urging traders and investors to take a serious reality check, pointing out that this decline is illustrated perfectly well on fixed income markets.