As we observed yesterday when we showed that if comparing the collapse in China's housing market with that of the US following their respective peaks then China is already a recession, we added that "as shown in the chart below [China] has recently engaged in several easing steps, with many more to come according to the sell-side consensus." Sure enough, just a few hours later, the PBOC announced its second Reserve Requirement Ratio (RRR) for all banks since February 4, when China had its first industry-wide RRR cut since May 2012. The move will be effective Monday, April 20.
"The last time China suffered such pace of capital outflows was during 2012 when $165bn of capital left during the last three quarters of that year. And before then it was during the Lehman crisis," JPM notes, in yet another sign that Beijing is stuck between a rock and a hard place as it battles to maintain the dollar peg in the face of slumping economic growth.
Central bankers in the U.S., Europe and Asia have created another massive bubble. This time it is a bubble in stocks, bonds and real estate simultaneously. There is no place to hide. But we’d put my money on war, chaos, and revolution. There will be no impunity for our gambling.
Just as China was closing for trade and Europe was opening, something previously unseen happened: no, not another another GPIF or Virtu inspired marketwide stop squeeze, those are quite recurring these days. It was virtually every Bloomberg terminal around the globe suddenly going dark.
- Fed Shies Away From June Rate Hike (Hilsenrath)
- Europe Stocks Fall Most in Three Weeks Amid Greece as Banks Drop (BBG)
- China Futures Tumble on Trust Curbs, Expansion of Short Selling (BBG)
- Oil slips below $64 as ample supplies weigh (Reuters)
- Fed officials lean all ways on rate hikes, data in focus (Reuters)
- Eurozone deflation eases in March (FT)
As noted earlier, while tens of thousands of Bloomberg terminal users were twiddling their thumbs during an outage that lasted several hours, China crashed. There was some confusion about the cause of the rapid move, but it appears the catalyst was an announcement by the China Securities Regulatory Commission in which it allowed fund managers to lend shares for short-selling, and will also expand the number of stocks investors can short sell, in a bid to raise the supply of securities in the market.
Because the only thing more exciting than betting on the continuation of a margin-fueled, self-feeding domestic mania is betting on the exchange where the maniacs are trading...
While the world gasped last night when China's production-based, and goalseeked GDP number came in at 7.0% - the lowest in 6 years the truly scary numbers were in the details, which revealed unprecedented deterioration. Details which suggest China is now growing at a 1.6% annual pace: the lowest in modern history.
A month ago we warned "Beijing, you have a big problem," and showed 10 charts to expose the reality hiding behind a stock market rally up over 100% in the last year. Tonight we get confirmation that all is not well - China GDP fell to 7.0% (its lowest in 6 years) with QoQ GDP missing expectations at +1.3% (vs 1.4%). Then retail sales rose 10.2% YoY - the slowest pace in 9 years (missing expectations of 10.9%). Fixed Asset Investment rose 13.5% - the lowest since Dec 2000 (missing expectations). And finally Industrial Production massively disappointed, rising only 5.6% YoY (weakest since Dec 2008). Finally, as a gentle reminder to the PBOC-front-runners, a month ago Beijing said there was no such thing as China QE (and no, the weather is not to blame.. but the smog?).
The panic buying by China’s newly-minted, day trader hordes took a breather on Tuesday which we think presents as good an opportunity as any to assess what factors might intervene to derail the self-feeding margin madness that has Shanghai and Hong Kong partying like it’s 1999 on the Nasdaq.
As Wall Street struggles to explain last night’s trade data out of China which seemed to vividly illustrate the notion that the combination of the yuan’s dollar peg and generally weak demand can and will take a devastating toll on the country’s exports, and as iron ore does its best dead cat bounce impression on the “psychologically” important news that Australia’s fourth largest miner is suspending operations, Citi is out with a rather dismal take on the outlook for iron ore prices.
While today's macro calendar is empty with no central bank speakers or economic news (just the monthly budget (deficit) statement this afternoon), it’s a fairly busy calendar for us to look forward to this week as earnings season kicks up a gear in the US as mentioned while Greece headlines and the G20 finance ministers meeting on Thursday mark the non-data related highlights.
Everyone was shocked by yesterday's Chinese March trade update which showed that while imports slid largely as expected, it was the 15% drop in exports, the largest in over a year, that prompted many to wonder just how big the global trade slump really is, masked by what has now become pervasive, global QE. This was the worst performance, exports and imports combined, since late 2009. Below is a selection of responses by Wall Street analysts trying to justify how - with global equities, if only in local currency terms, at all time highs - China can be doing so badly.
China Stocks Soar To 7 Year High After Collapse In Exports; US Futures Slip On Continuing Dollar SurgeSubmitted by Tyler Durden on 04/13/2015 06:55 -0400
If there was any doubt that global trade is stalling, it was promptly wiped out following the latest abysmal Chinese trade data which saw exports tumble by 15% - the most in over a year - on expectations of a 8% rebound, with the trade surplus coming in at CNY18.2 billion, far below the lowest estimate. While unnecessary, with the Chinese GDP growth rate this Wednesday already expect to print at a record low, this was further evidence of weak demand both at home and abroad. Weakness was seen in most key markets, and the strength of China's currency was partly to blame, which again brings up China's CNY devaluation and ultimately QE, which as we wrote some time ago, is the ultimate endgame in the global reflation trade which, at least for now until the CBs begin active money paradropping to everyone not just the 0.01%, is only leading to inflation in stocks and deflation in everything else.v