Following yesterday's furious market drop in Chinese stocks, just before the overnight open, Morgan Stanley came out with a much distributed report urging investors "Not to buy this dip", and so they didn't. As a result, the Shanghai Composite imploded, at one point trading down 8% while the Chinext and Shenzhen markets crashed even more. This was the single biggest Shanghai Composite one-day drop since 2007, and with a close at 4192.87 the SHCOMP is now on the verge of a bear market, down 19% from its June 12 highs. China's second largest market, Shenzhen, is now officially in a bear market.
Chaos reigns, with contradictory headlines pushing and pulling futures in any one direction, only for the next headline to undo the previous one. And only headline scanning frontrunning algos have any chance of trading any of this...
- Greece Handed New Terms as Tsipras Approaches Decision Time (BBG)
- As U.S. Probes $12.7 Trillion Treasury Market, Trader Talk Is a Good Place to Start (BBG)
- Signs Swedish QE Backfiring as Liquidity Evaporates (BBG)
- ECB approves ELA funding requested by Greece- banking source (Reuters)
- Greek Millennials Can't Find Work But Actually Want to Keep the Euro (BBG)
- Greek deal or not, the euro is now a different beast (Reuters)
- Promoter’s Arrest Sheds Light on Cynk’s $6 Billion Surge (BBG)
- The World's Biggest Economies Are About to Feel the Impact of China's Slowdown (BBG)
- Senate Clears Trade Bill’s Way to Passage (WSJ)
Before taking a look at Europe, an update on China. Just a few short hours ago, when looking at the bursting of the Chinese bubble where stocks were down between 3% and 5% across the board in the first post-holiday trading session after the worst week in 7 years, we said that "without assistance (levitation) from the same PBOC that just clamped down on liquidity, the China bubble has burst." And then as if by request, minutes later we got, drumroll, levitation and the stickiest stick-save by the PBOC seen in months, when the Shanghai Composite staged an unprecedented 7% surge from the lows to close 2.2% higher after tumbling as much as 5% earlier in the session. And just like that, faith in the "wealth effect" is preserved.
today is Friday taken to the nth degree, with the markets having already declared if not victory then the death of all Greek "contagion" leverage, following news that a new Greek proposal was sent yesterday (which as we summarized does not include any of the demanded by the Troika pension cuts), ignoring news that Greece had again sent Belgium the wrong proposal which the market has taken as a sign of capitulation by Tsipras, and as a result futures are surging higher by nearly 1%, the German DAX is up a whopping 3.1%, on track for the biggest one day gain in three years, Greek stocks up over 8%, German and US Treasurys sliding while Greek and peripheral bonds are surging.
Just a few months ago, we warned Brazil's economy was on the verge of collapse as the fiscal situation was deteriorating rapidly. It appears, judging by the most recent data from the oil-rich nation, that we were right. Broad retail sales have now declined for five consecutive months with the seasonally adjusted broad retail sales index now at the same level as early 2012. Core retail sales declined 3.5% YoY during April (weakest print since Aug 2003) and broad retail sales declined by an even larger 8.5% YoY (lowest on record), and as Goldman warns, the outlook for private consumption and retail sales in the near term remains very weak.
Germany Enters Correction; EMs In Longest Losing Streak Since 1990 Routed By Turkey, Obama Turmoils DollarSubmitted by Tyler Durden on 06/08/2015 06:48 -0400
While there were key macroeconomic data out of Asia earlier in the session, with Japan revising its Q1 GDP up from 2.4% to 3.9% (due to an upward revision to capex) making some wonder if it simply didn't snow in Japan this winter, as well as Chinese trade data that was once again disappointing with the third consecutive drop in exports coupled with an 18.1% collapse in imports hinting that nothing is going well in China's economy (which once again sent stocks soaring this time up another 2.2% on certainty another PBOC rate cut is imminent, pushing the PBOC to a fresh 7-year high of 5,132), it was actually a leaked Obama comment on the strong USD that moved markets.
June is off with a bang, and a very busy week in the macro economic calendar, both globally and in the US, which culminates with the latest "most important ever" payrolls report, one which will surely be closely watched by a Fed which may hike as soon as a few weeks from now (but probably won't).
Following the collapse in Gallup's consumer confidence and Bloomberg's Consumer Comfort, UMich Consumer Senitment printed 90.7 (against expectations of a rise to 89.5 from 95.9). With May's preliminary print the biggest miss in 17 months, this final drop leaves Consumer Sentiment at its lowest since November 2014. Hope dropped from 88.8 to 84.2 but it was the collapse in Current conditions - which fell from 107 to 100.8 - that crushed the headline. This is the biggest plunge in current conditions since Summer 2011 (the US debt downgrade). Business expectations plunged to 8-month lows, employment expectations tumbled... but the number who think it's a good time to buy a house rose.
The most prominent market event overnight was once again the action in China's penny-index, which after tumbling at the open and briefly entering a 10% correction from the highs hit just two days ago, promptly saw the BTFDers rush in, whether retail, institutional or central bankers, and after rebounding strongly from the -3% lows, the SHCOMP closed practically unchanged following a 2% jump to complete yet another 5% intraday swing on absolutely no news, but merely concerns what the PBOC is doing with liquidity, reverse repos, margin debt, etc. Needless to say, this is one of the world's largest stock markets, not the Pink Sheets.
With business confidence collapsing, Bloomberg's Consumer Comfort index - after dropping to its lowest since December - plunged once again this week to 40.9 (from 42.4). This is the lowest since Novemeber and extends the losing streak to 7 weeks - something we have not seen sionce May 2008. This confirms Gallup's weekly tracking of consumer confidence dropped back to its lowest levels since early December 2014 with 53% of Americans now saying the economy is getting worse. Despite all the exuberance over lower oil prices, Consumer Comfort in The South is crashing. Perhaps even worse - for a consumer-driven economy - is that the "buying-climate"suffered its biggest drop since Dec 2011.
Courtesy of central planning, virtually every single capital market has become an illiquid penny stock, with wild swings from one extreme to the other, the latest example of this being the Shanghai Composite, which after soaring 10% in the past ten days, crashed 6.5% overnight tumbling 321 points to 4620 after it briefly rose just shy of 5000. This was the biggest drop since January 19 when the Composite dropped 7.7% only to blast higher ever since. Putting the "plunge" in perspective, now the SHCOMP is back to levels not seen in... one week.
Switzerland is set to open its first Bitcoin bank, multiple sources tell Handelszeitung. Meanwhile, Xapo, the self-appointed "Fort Knox" of the crypto currency world, is relocating from Silicon Valley to Zurich.
Today's entire surge in stocks and EURUSD was predicated on nothing more than momentum ignited from rumors of a report that a deal was imminent. So now that Germany has come out and stated - unequivocally - that:
*GERMAN GOVT SURPRISED BY GREEK REPORTS OF PROGRESS: OFFICIAL
One might imagine some of the ramp would be removed.. and it is in EURUSD, but not in stocks. However, as JPMorgan warns "hope is not an investment case. The longer we go without a deal, the less likely we believe a deal becomes/the higher the chance of Grexit."