Asian equities are trading lower across the board on the back of some negative credit stories from China. Shanghai Securities News noted that ICBC and some other banks have curbed loans to developers in sectors such as steel and cement. Slower gains in home property prices in China’s tier 1 cities are also not helping sentiment. Beijing and Shenzhen prices rose 0.4% in January, which looks to be the slowest monthly gain since October 2012 according to Bloomberg. Elsewhere there are reports that a property developer in Hangzhou (Tier 2 city in China) is reducing its unit prices by 19%. Our property analysts noted that given the strong gains seen in Tier-1 and some bigger Tier-2 cities in 2013, a slowdown or negative trends in price growth should not be a surprise. Nevertheless, it has been a very weak day for Chinese and HK markets with the Shanghai Composite and the Hang Seng indices down -2.0% and -1.2% lower as we type. Across the region, bourses in Japan and Korea are down -1.0% and -0.6%, respectively.
A look at the price action among the major currencies for the week ahead.
Rates to remain low for longer. Tapering exit strategy is high. Sorry, folks,it was never QE-infinity despite its open-ended nature.
After surging yesterday for no reason whatsoever because as we explained on several occasions, there were no surprises in the Tuesday BOJ statement, and the doubling and extension of its loan facilities was implicit and factored into the doubling of its monetary policy (as goldman explained quite well), both the Nikkei and the USDJPY has been forced to revert, with the latter all important carry funding pair back to 102 and in danger of sliding lower, as a result ES is now below yesterday's lows. Which is why the 102 USDJPY "invisible hand" tractor beam will be all important today especially if the market finally starts paying attention to the proxy civil war that has gripped the Ukraine. Stocks traded lower, albeit in a relatively range-bound range this morning, with the Spanish IBEX-35 underperforming. Banking names remained under pressure, with focus still on yesterday’s reports that Spanish banks' bad loans marked a fresh record, together with comments by ECB's Weidmann, who said that sovereign debt purchases would constrain the central bank via political pressure. Similar view was also echoed by ECB’s Nowotny, who said that government bond buying US Fed-style would be difficult to do under ECB's mandate.
Annual global investment in bars and coins reached 1,654 tonnes, up from 1,289 tonnes in 2012, a rise of 28%. Check out GoldCore's webinar with Gerald Celente, this Thursday, February 20th.
Despite all the hoop-la of the UK economic recovery - and Mark Carney's credibility-sapping dynamic forward guidance "we'll know it when we see it" perspective - billions in QE has failed to spark enough 'inflation' to break the Bank of England's oh so critical 2% inflation target. For the first time since November 2009, UK CPI fell below the 2% 'threshold' in January (must be the weather) as Japan's deflation exporting (what goes up there must go down everywhere else) spreads from the US to the UK. Of course, the silver lining for equity markets is that this provides Carney just the right ammo to keep rates lower for longer at their record lows; but price pressures are building...
The key event overnight was the monetary policy announcement by the BOJ in which its kept it QE unchanged while the Board decided by unanimous vote to double the scale of two funding facilities, namely the Stimulating Bank Lending Facility and Growth-Supporting Funding Facility and to extend the application period for these facilities by a year. Both facilities are designed to stimulate the provision of funding to Japanese banks, allowing them to borrow from the BoJ at a fixed rate of 0.1%pa, for a period 4 years now, instead of 1-3 years previous. Some are arguing that by expanding its funding programmes but not changing its asset purchase targets, the BoJ has signalled its intention to ease policy whilst preserving firepower for extra stimulus in coming months when a sales-tax hike is due to kick-in. The result was a surge in both the Nikkei and USDJPY. The problem, and confirmation that once again the market is now a bunch of cluless automatons unable to analyze even one sentence below the headline level, is that as Goldman explained overnight, the "surprise" announcement was already fully factored in.
Spoos Rise To Within Inches Of All Time High As Overnight Bad News Is Respun As Great News By Levitation AlgosSubmitted by Tyler Durden on 02/17/2014 08:26 -0400
After tumbling as low as the 101.30 level overnight on atrocious GDP data, it was the same atrocious GDP data that slowly became the spin needed to push the USDJPY higher as the market became convinced that like everywhere else, bad news is great news and a relapse in the Japanese economy simply means more QE is coming from the BOJ despite the numerous articles here, and elsewhere, explaining why this very well may not be the case. Furthermore, as we noted last night, comments by the chairman of the GPIF panel Takatoshi Ito that the largest Japanese bond pension fund should cut its bond holdings to 40% were used as further "support" to weaken the Yen, and what was completely ignored was the rebuttal by the very head of the GPIF who told the FT that demands were unfair on an institution that has been functionally independent from government since 2006. The FSA “should be doing what they are supposed to be doing, without asking too much from us,” he said, adding that the calls for trillions of yen of bond sales from panel chairman Takatoshi Ito showed he "lacks understanding of the practical issues of this portfolio.” What he understands, however, is that in the failing Japanese mega ponzi scheme, every lie to prop up support in its fading stock market is now critical as all it would take for the second reign of Abe to end is another 10% drop in the Nikkei 225.
Overview of the events and data that will be of interest to investors.
The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.
With so much of the recent bad news roundly ignored or simply "priced in" and blamed on the snow, it is unknown just what it is that catalyzed the overnight round of risk-offness, but whatever the ultimate factor, it first dragged the Nikkei lower by 1.8%, as we noted previously, then sent the SHCOMP down by 0.55%, then ultimately dragged the USDJPY below the key 102 support area which in turn pulled US equity futures to set the scene for a red open (with no POMO and no Yellen testimony today which also was canceled due to snow), and, putting it all together, suddenly Europe too is back on the scene, with a blow out in Italian yields driven by the realization that the Letta government is on the edge of collapse, in a deja vu moment to those hot summers of 2011 and 2012.
- Anti-Euro Party’s Le Pen Gains Supporters, French Poll Shows (BBG)
- Carney Renews BOE Low-Rate Pledge to Fight Slack in Economy (BBG)
- Bank of England hints at 2015 rate rise (Reuters)
- ECB bond-buying intact and ready after court decision-Coeure (Reuters)
- Canada scraps millionaire visa scheme, dumps 46,000 Chinese applications (SCMP)
- Scrap this then? Vancouver facing an influx of 45,000 more rich Chinese (SCMP)
- China's January Exports Power Higher, Up 10.6% (WSJ) ... and nobody believes the number
- Emerging-Market Shakeout Putting Reserves Into Focus (BBG)
- Wall Street's most eligible banker Fleming waits for suitor (Reuters)
- Kazakh Devaluation Shows Currency War Stirring as Ruble Dips (BBG)
After initially sending the all important USDJPY carry pair - and thus all risk assets - into rally mode, the initial euphoria over manipulated Chinese trade data (see China Trade Puzzle Revived as Hong Kong Data Diverge), has all but fizzled and at last check the USDJPY was sliding to its LOD, approaching 102 from the wrong side. That, and a statement by the ECB's Coeure that the ECB is "very seriously" considering a negative deposit rate (and that the OMT is ready to be used even though it obviously isn't following the latest brewhaha from the German top court) have so far defined the overnight session, the latter having sent the EUR sliding across all major pairs.
In what has to be the most disappointing denial of central bank manipulation of a market in recent history, and probably never, the Bank of England today announced that it "has seen no evidence to back media allegations that it condoned or was aware of manipulation of reference rates in the foreign exchange market." As a reminder, last week we reported, that according to a Bloomberg, "Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms" or, in other words, the highest monetary authority in England, and the oldest modern central bank, explicitly condoned and encouraged manipulation. Fast forward to today when Andrew Bailey, the Bank's deputy governor and chief executive of the Bank's Prudential Regulation Authority, told parliament's Treasury Select Committee on Tuesday it had no evidence to suggest that bank officials in any sense condoned the manipulation of the rate-setting process. In other words, it very well may have... but there just is no evidence - obviously in keeping with the bank's very strict "smoking manipulation gun document retention policy."