Australia

Unlike the Federal Reserve - which openly encourages speculative wealth creation/redistribution and has never seen an equity bubble it didn't believe was contained - the PBOC appears, by its actions tonight, to be concerned that things have got a little overheated in its corporate bond and stock markets as hot money ripped into the nation's capital markets on hints of further easing and QE-lite a few months ago. In a show of force, the PBOC simultaneously fixed CNY significantly stronger (implicit tightening) and enforced considerably stricter collateral rules on short-term loans/repos. With Chinese stocks concentrated is even fewer hands than in the US (and recently fearful of the surge in margin trading), it appears the PBOC is trying to stall the acceleration is as careful manner as possible. The result, as Bloomberg notes, is a major squeeze in CNY (biggest drop since Dec 2008), interest-rate swaps ripped higher along with corporate bond yields,  and most Chinese stocks sold off (with two down for every one up) though the latter is stabilizing now.

Lower oil prices have killed off major plans for liquefied natural gas exports from Canada’s west coast. Although low oil prices may have been the icing on the cake, Canadian LNG projects were facing serious obstacles before oil prices plummeted.

A dispassionate look at the week ahead.

• Fall of the Bond King: How Gross Lost Empire as Pimco Cracked (BBG)
• Hong Kong 'Occupy' leaders surrender as pro-democracy protests appear to wither (Reuters)
• Ashton Carter, Ex-Pentagon No. 2, Emerges as Obama Favorite for Defense Secretary (WSJ)
• Oil, the Ruble and Putin Are All Headed for 63. A Russian Joke -- for the Moment (BBG)
• New U.S. oil and gas well November permits tumble nearly 40 percent (Reuters)
• Swedish government on brink of collapse (AJ)
• China says Britain has no moral responsibility for Hong Kong (Reuters)
• Indian Labs Deleted Test Results for U.S. Drugs, Documents Show (BBG)

Switzerland’s ‘Save our Swiss Gold’ referendum was convincingly rejected yesterday by the Swiss electorate following an aggressive anti-gold campaign in recent weeks that had been closely watched both in Switzerland and abroad. 

Unusually, it involved the Swiss National Bank (SNB) very actively, and ultimately successfully, trying to convince the electorate along with the main political parties to return a ‘no’ vote.

Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.

The fun thing about Paul Krugman is that you often can use his own charts against him. For a recent example, consider the issue of “sticky wages.”

Unvarnished analysis as if people were not stupid, easily manipulated, or subject to false consciousness.

You can’t force people to spend, not if you’re a government, not if you’re a central bank. And if you try regardless, chances are you wind up scaring people into even less spending. That’s the perfect picture of Japan right there. There’s no such thing as central bank omnipotence, and this is where that shows maybe more than anywhere else. And if you can’t force people to spend, you can’t create growth either, so that myth is thrown out with the same bathwater in one fell swoop. Some may say and think deflation is a good thing, but I say deflation kills economies and societies. Deflation is not about lower prices, it’s about lower spending. Which will down the line lead to lower prices, but then the damage has already been done, it’s just that nobody noticed, because everyone thinks inflation and deflation are about prices, and therefore looks exclusively at prices.

Because nothing gives "Thanks" like Americans fighting over things they don't need...

I love the idea that prosperity can be decreed by a G20 communiqué. World leaders in Brisbane have airily committed themselves to two per cent growth. (Why only two per cent? Why not 20 per cent? Or 200 per cent? Who knew it was so easy?) Meanwhile, in the real world, the divergence between Continental Europe and the rest of the planet accelerates. David Cameron can hardly have failed to notice, as he looked around the G20 table, that his European colleagues are the ones with the worst problems. Britain is in the wrong place.

Did China just re-enter the currency wars? The Chinese Yuan dropped 0.29% overnight - its biggest drop since September and 2nd biggest devaluation since March - as the currency tumbles back in line with the PBOC's fixing for the first time in over 3 months. Despite 'hopes', S&P confirms the recent (and reconfirmed) rate cut doesn’t signal renewed government intentions to resort to aggressive stimulus to prop up economy. More troubling is the fact that China's huge corporate debt market appears to be freezing as over $1.2 billion in bond sales were scrapped or delayed last week suggesting wall of maturing debt will find it increasingly difficult to roll-over and keep the dream alive (especially in light of Haixin's bankruptcy last week).

• Grand jury expected to resume Ferguson police shooting deliberations (Reuters)
• PBOC Bounce Seen Short Lived as History Defies Bulls (BBG)
• Home prices dropped in September for the first time since January (HousingWire)
• UPS Teaches Holiday Recruits to Fend Off Dogs, Dodge NYC Taxis (BBG)
• US oil imports from Opec at 30-year low (FT)
• Hedge Funds Bet on Coal-Mining Failures (WSJ)
• Putin Woos Pakistan as Cold War Friend India Buys U.S. Arms (BBG)
• How the EU Plans to Turn $26 Billion Into $390 Billion (BBG)
• The $31 Billion Bet Against Brazil’s New Finance Minister (BBG)

Another day, another case of central banks, not one but two this time, dictating "price" action.

Russia finds itself in familiar territory after a controversial half-year, highlighted by the bloody and still unresolved situation in Ukraine. Nonetheless, the prospect of further sanctions looms low and Russia’s stores of oil and gas remain high. Shortsighted? Maybe, but Russia has proven before – the 2008 financial crisis for example– that it can ride its resource rents through a prolonged economic slump. Higher oil price volatility and sanctions separate the current downturn from that of 2008, but Russia’s economic fundamentals remain the same – bolstered by low government debt and a large amount of foreign reserves.