Hong Kong

Behind the veneer of “all is well” being promoted by both world Governments and the Mainstream Media, the political and financial elite have begun implementing moves to prepare for the next Crisis.

Fostering dependence on irresponsible banks and a still very vulnerable banking sector will make the entire western financial and economic system even more vulnerable.

Despite the biggest intervention surge in offshore Yuan on record ("predatoring" any excess speculative fervor on PBOC actions in the spot market), a 'PBOC Advisor' noted that "long-term FX intervention was not their target." The Hong Kong Dollar is pressuring the strong-end of its range against the USD, trapped between the USD peg and weak economy (like so many others). Chinese stocks continue to tread water as China's Premier Li rules out QE (perhaps because pork prices are already at record high prices and are rising at a record pace), exclaiming that there "well be no hard landing," but BofAML expected 50-100bps more RRR cuts this year. PBOC strengthened the Yuan Fix tonight (just modestly).

Apparently fed up with the persistent spread between the onshore and offshore yuan, China has decided to add one more spinning plate to its collection by intervening in the offshore spot market.

• Compare: S&P 500 Futures Advance After U.S. Stocks Ignored Global Rally (BBG)
• And contrast: Global Stock Rally Grinds to a Halt (BBG)
• And be very confused: Global Stocks Lower on U.S. Interest Rate Uncertainty (WSJ)
• Hilsenrath: Fed Wavers on September Rate Rise (WSJ)
• Time for more QE: Abe Adviser Says Next Month Good Opportunity for BOJ Easing (BBG)
• Brazil downgraded to junk rating by S&P, deepening woes (Reuters)
• Kiwi dollar tumbles after New Zealand cuts interest rates (Reuters)

It has become virtually impossible to differentiate between actual central bank intervention, hopes of central bank intervention, and how the two interplay on what was once the "market" but is now merely the place where money printers duke it out every day in some pretense of price discovery set by those who literally print money.

• Global stocks rally as investors scent fresh stimulus (Reuters)
• Japan's Nikkei 225 Rises 7.7% for Biggest Gain Since October 2008 (BBG)
• China's Stocks Advance for Second Day Amid Stimulus Speculation (BBG)
• Abe Pledges Corporate Tax Cut as Investments Slump (BBG)
• U.S. to shift 50 staff to boost office handling Clinton emails (Reuters)
• Chinese Premier Li Keqiang Says China Doesn't Want a Currency War (BBG)
• One Thing China Got Right (BBG)

Keys in the week ahead:  equity markets--still look lower; China--volatility likely to continue; Fed--market says no Sept hike

Divegence driver of the dollar was never predicated on a particular time frame for the Fed's lift-off.  Others are easing.  Trajectory is the key.  Here is my sense of the near-term dollar outlook, wiht a look at some other asset markets as well.  

"Following the RMB devaluation some weeks ago, markets have been erratic, fearful that the initial move was the beginning of a larger devaluation cycle that could disrupt global markets. Given how worried markets have been about China, a better-than-expected reserves number holds the potential for risk assets to rally as devaluation fears abate."

• Jobs Report Could Seal the Deal on Rates (WSJ)
• The Jobs Report and the August Curse: Jobs Day Guide (BBG)
• Migrants hold out on Hungarian 'freedom train'; Orban says millions coming (Reuters)
• Migrant Crisis Divides Europe (WSJ)
• German industry orders fall in July on weak foreign demand (Reuters)
• Alibaba’s Jack Ma, Joe Tsai to Borrow $2 Billion Against Shares (WSJ)
• U.K. Retailers Post Worst Sales Decline Since Financial Crisis (BBG)

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.

"China is imposing fresh controls to prevent too much money from leaving the country, in an effort to keep badly needed funds at home to battle a deepening slowdown in the world’s No. 2 economy." This is undsiputedly bad news for China, but Blythe Masters would be the first to admit, escalating Chinese capital controls would be just the thing bitcoin needs to surge, and surpass, it previous all time highs...

Stocks in Asia and Europe have fallen sharply again this morning and gold remains robust on safe haven demand

• Markets on edge as policymakers flex muscles (Reuters)
• European shares recover from rough ride (Reuters)
• For Stock Markets, the Moment When Humans Matter (WSJ)
• Puerto Rico's PREPA, bondholders have framework for deal (Reuters)
• Hundreds of migrants protest at Budapest station, want to go to Germany (Reuters)
• New Whale Seen Moving Tokyo Markets (BBG)