Copper

Today's 1.75% rally in copper (ripping vertical at the US open) broke a record 14-day losing-streak after COMEX futures tested towards a '1' handle numerous times for the first time since March 2009 (when the S&P 500 traded around 800). The metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, according to Goldman, as China futures open interest surges, but discussions at the 2015 Shanghai CESCO conference last week exposed the extremely bearish views of Chinese market participants regarding Chinese metals demand in 2016 (notably sentiment was worse than that expressed by investors outside of China) specifically citing a Fed rate hike before year-end as a further bearish factor for metals.

It had been a relatively quiet session overnight when as reported previously, the geopolitical situation in the middle east changed dramatically in a moment, when NATO-member country Turkey downed a Russian fighter jet allegedly over Turkish territory even though the plane crashed in Syria, and whose pilots may have been captured by local rebel forces. The news promptly slammed Turkish assets and FX, sending the Lira tumbling, pushing lower European stocks and US equity futures while sending 2 Year German Bunds to record negative yields.

2015 ends with the market cap of Amazon & Google exceeding that of every single Chinese company in the MSCI China index… the US stock market a mere 107 trading days away from becoming the 2nd longest bull market of all-time, with equity leadership driven by “growth” (longest duration of outperformance ever) & “quality” (at all-time relative high)… and $6trn of negatively-yielding government bonds, $17trn of bonds yielding <1%, and the Fed expected to raise the Fed funds rates for the 1st time since 2006.

The debt to GDP ratio for the entire world is 286%.  In other words, global debt is almost 3 times the size of the world economy.  Both public and private debt are exploding and - despite what mainstream economists think - 141 years of history shows that excessive private debt can cause depressions.

As a result of the global commodity weakness, global stocks have fallen for the first time in six days as the sell-off in commodities continued, dragging both US equity futures and European stocks lower. However, putting this in context, last week the MSCI All Country World Index posted its biggest weekly gain in six weeks: alas, without a coincident rebound in commodity prices, it will be merely the latest dead cat bounce.

A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies.

Front-month (Dec) copper futures are trading near $200 ($200.15) for the first time since March 2009 as the collapse in the global economic indicator extends to an unprecedented 14th day in a row. The ongoing collapse appears to have finally impacted Chinese equities which have given up the morning's gains and are drifting rapidly lower. Overall, as Goldman warns, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy.

With enough monetary deception anything’s possible. But, nonetheless, gravity still exists.

Spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before 2008! 

By now, everyone knows Brazil is stuck in a stagflationary nightmare that's made immeasurably worse by the country's seemingly intractable political crisis. But what about the rest of Latin America? Goldman takes a close look at the regional outlook for the next four years and finds a decidedly unfavorable growth-inflation mix. 

Fed Speak became hawkish to telegraph to financial markets that the December meeting was a potential live meeting for a rate rise.

Futures are modestly higher in early trading having tracked the USDJPY once again almost tick for tick, with the carry trade of choice rising to 123 shortly after Mario Draghi's latest speech pushed the dollar strong initially only to see most gains promptly evaporate against both the Yen and the Euro. European shares are likewise little changed, after gaining earlier, while Asian stocks rise; oil also advanced in early trading only to drop to its lowest overnight level moments ago, a few dimes over $40, with aluminum and copper both posting modest increases.

China’s producers couldn’t get the prices they wanted anymore, as early as 4 years ago, and that’s where deflationary forces came in. No matter how much extra credit/debt was injected into the money supply, the spending side started to stutter. It never recovered.