If the market is right, Goldman warns that current cross-asset-class volatility appears to be pricing in a lot of economic damage. As they note, VIX doesn’t just trade the economy; it also has a strong and often humbling element of risk sentiment baked in.
Copper prices have surged over 4% this morning, breaking above the 50-day moving average (trading 2.41, near 2-month highs). Aside from Glencore's demise and modest strength in the Chilean peso today, this seems more like an algo-driven run off China's massive intervention-driven momentum.
- Sure, why not: China Rebounds as Trade Data Disappoints (BBG)
- Oh, that's why: China's Stock-Rescue Tab Surges to $236 Billion, Goldman Says (BBG)
- Can't make this up: German finmin says must avoid reliance on debt, cenbank stimulus (Reuters)
- Stocks rise after contrasting China, Germany trade data (Reuters)
- Euro zone second-quarter GDP revised up as Italy grows faster (Reuters)
- Brent oil rises on European, Chinese data; oversupply weighs (Reuters)
- Corporate Prosecution Deals Headed for a Legal Test (WSJ)
Futures Soar After Dramatic Chinese Last Hour Intervention Scrambles To Mask Latest Terrible Trade DataSubmitted by Tyler Durden on 09/08/2015 06:52 -0400
The last time we looked at Chinese stocks, just a few hours ago, they were on pace to close back under 3000, following the latest collapse in trade, where in August exports dropped 5.5% (last -8.3%) while imports tumbled -13.8% in dollar terms (worse than the -8.1% prior). As the Reuters chart below shows, this was the 10th month in a row of declines and the worst stretch since the 2008 crisis, confirming China will need far more currency devaluation to stabilize the trade pain. And then Chinese authorities intervened with gusto, waiting until the start of the afternoon session, at which point a massive buying orgy ensued, and pushed the SHCOMP from down more than 2% to close at the day highs, up some 2.9%!
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Glencore Capitulates: Scrambles To Avoid Default By Selling Equity, Dumping Assets, Cutting DividendSubmitted by Tyler Durden on 09/07/2015 09:37 -0400
Early this morning Glencore finally capitulated and admitted defeat not only on its expansionary phase (it was just last year Glencore had approached Rio Tinto to engage in a merger), but on its shareholder "friendliness", with a stunning annoucement that it would proceed in a $10 billion debt reduction, issuing $2.5 billion in equity in the form of a rights offering, sell $2 billion worth of assets (such as "proposed precious metals streaming transaction(s) and the minority participation of 3rd party strategic investors in certain of Glencore’s agriculture assets, including infrastructure"), cut working capital by $1.5 billion, cut capex and its loan book by a further $1-$1.8 billion... oh, and it would also scrap its final $1.6 billion dividend as well as next year's interim payout, saving a further $2.4 billion. All this because our "best way to trade China's blow up" was finally picking up steam.
Chinese Stocks Surge Then Tumble At The Close, Stun Market News Algos; Futures Levitate On Back Of USDJPYSubmitted by Tyler Durden on 09/07/2015 07:50 -0400
Chinese stocks opened with a bang, and as we previously noted soared higher at the open after China's long 4-day holiday weekend, which however subsequently slowly (but very surely) fizzled, eating away at the hope that the 3-day drop in the Shanghai Composite would finally come to an end following comments from PBOC governor Zhou that the recent rout in Chinese stocks is almost over, and result in a relief rally in Europe and the US. Alas, all that was promptly swept away at the end of trading in China when the Shanghai Composite tumbled at close of trading to confirm just how unpleasant a "death cross" is coupled with loss of central bank control, and to push the Shanghai Composite down 2.5% for the day and 3.4% for the year.
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For anyone who (still) believes that Canada has a diversified economy...
"This Time May Be Different": Desperate Central Banks Set To Dust Off Asia Crisis Playbook, Goldman WarnsSubmitted by Tyler Durden on 09/04/2015 18:00 -0400
"The room to ease policy further, i.e., to adopt counter-cyclical policies, is now much more limited than in the past. To the contrary, in some cases monetary tightening may be needed (despite weaker real business cycles) in order to continue to attract foreign capital, anchor domestic currencies and preserve the integrity of the respective inflation targeting frameworks. Hence, we may soon enter a period of weaker FX and higher policy and market rates: i.e., market dynamics that would resemble more the 1997 Asian Financial Crisis."
Copper prices are in free-fall this morning, slammed lower by the "good-enough" jobs data. But we suspect the real reason lies elsewhere...
Moments ago, US equity futures tumbled to their lowest level in the overnight session, down 22 points or 1.1% to 1924, following both Europe (Eurostoxx 600 -1.8%, giving up more than half of yesterday's gains, led by the banking sector) and Japan (Nikkei -2.2%), and pretty much across the board as DM bonds are bid, EM assets are all weaker, oil and commodities are lower in what is shaping up to be another EM driven "risk off" day. Only this time one can't blame the usual scapegoat China whose market is shut for the long weekend.
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