When the FOMC is deliberately manipulating asset prices and credit spreads... collateral damage is inevitable.
Things are looking increasingly shaky for central planners around the globe.
Offshore Yuan is sliding lower after its "US equity market saving" surge during the day session as PBOC fixes Yuan stable for the 10th day in a row. Despite the smoke and mirrors of stability however, they injected a colossal 400 billion Yuan into the financial system - the most in 3 years.
Just before the US equity market topped out last August, none other than infamous stock-chart-extrapolator Laszlo Birinyi ventured on to CNBC and proclaimed that the S&P 500 will hit 3,200 by the end of 2017. Since the soprano uttered that extreme, US equity markets have collapsed not just once, but twice and now trade at levels first seen over two years ago...
Well that escalated quickly...
Last night's Chinese data deluge can only be classified with one word: bad. So if bad news was again bad news as many claim, both commodities (read oil), and US equity futures should be tumbling right now... but just the opposite is happening and in fact both Brent and WTI have already jumped over $30 this morning. This happens even as the IEA said this morning that global oil markets could “drown in oversupply,” And yet this morning both commodities, global stocks and futures soaring? Simple: the following Bloomberg headline summarizes it: "Brent Rallies More Than $1 as China GDP Spurs Stimulus Bets," and where Brent goes, so goes risk, and the S&P.
Gold retains a key role of a major diversifier in well-structured retail investment and pension portfolios ... core defensive and hedging properties vis-à-vis global currencies and fixed income, as well as oil and a range of other commodities.
"The Fed has painted itself into a corner... [the current situation's severity] is very similar to what you get before you slip into a crisis....The bumpy ride is probably not over yet... stay on guard."
Xiao Gang, chairman of China's securities regulator, has offered to resign amid ongoing turmoil in the country's equity markets - turmoil which he says stems from "inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms."
With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.
"Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016."
The world’s grand experiment with debt has come to an end. And it’s now unraveling.