Dollar recovered from the exaggerated panic at the start of last week. Outlook is still constructive. Here is an overview of the technical condition of currencies, bonds, oil , and S&P 500.
The private economy and its millions of savers exist for the convenience of the apparatchiks who run the central bank. In their palpable fear and unrelieved arrogance, would they now throw millions of already ruined retirees and savers completely under the bus? Yes they would.
News That Matters
Crash waves are notoriously volatile – several of the biggest one day rallies in history have occurred before and during crash waves. This makes short term forecasting even more of a coin flip than it normally is. However, we believe it is important not to lose sight of the forest for the trees; stock markets around the world have been in bubbles driven by extremely loose monetary policy, which ipso facto allows us to identify them as an example of artificial price distortion. Such bubbles always collapse sooner or later – unless the monetary authority decides to simply destroy the currency it issues, as has happened in Zimbabwe and is currently happening in countries like Venezuela and to a slightly lesser extent Argentina. We don’t expect the central banks of the developed nations to follow suit, at least not yet.
News That Matters
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.
Steep losses in the dollar, stocks and commodities, for sure, but does it really signal a systemic crisis?
Just as The BoE starts to hint at raising rates sometimes, maybe, possibly, never... The FTSE 100 tumbles into yet another correction - down 10% from its record highs set shortly after Draghi unleashed Q€. At current levels, the UK stock market has seen no appreciation since Feb 2013...
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The central bank has injected new capital into the China Development Bank (CDB), which provides medium and long term financing to major national projects, in a bid to reinforce its capital adequacy.
China Stocks Crash, More Than Half Of Market Halted Limit Down; PBOC Loss Of Control Spooks Global AssetsSubmitted by Tyler Durden on 08/18/2015 08:09 -0400
Just hours after the PBOC announced a modestly "revalued" fixing in the CNY, which curiously led to weaker trading in the onshore Yuan for most of the day before a forceful last minute intervention by the central bank pushed it back down to 6.39 it was the local stock market spinning plate - which had been relatively stable during the entire FX devaluation process - that China lost control over, and after 7 days of margin debt increases the Shanghai Composite plunged by 6.2% in late trade, tumbling 245 points to 3748, just 240 points above its recent trough on July 8, a closing level some 27% off its June peak.
PBoC Injection Shows China Worries About Outflows- WSJ
RANSQUAWK WEEK AHEAD VIDEO - 17th August - Markets remain concerned about China, key releases include US CPI and FOMC MinutesSubmitted by RANSquawk Video on 08/17/2015 08:19 -0400
- Markets will be keeping a close an eye on what action/if any the PBoC take to try and keep Chinese growth prospects on course.
- Main releases this week come in the form of US and UK CPI reports and the FOMC minutes release
- Oil moves nearer six-year low on Japan data, oversupply (Reuters)
- Commodity Slide Spurs Treasuries as Emerging Markets Extend Drop (BBG)
- Because 7 years is "just right" - BOE Official Says Don’t Wait Too Long on Rates (WSJ)
- How Medicare Rewards Copious Nursing-Home Therapy (WSJ)
- Millennials Are Developing Parents’ Taste for Jaguars, Cadillacs (BBG) ... and even more debt
- Mexican Billionaire’s Firms Swept Up in U.S. Probe of Citigroup (BBG)