- Dollar rises versus euro, oil drops before ECB, OPEC meetings (Reuters)
- Smog chokes Chinese, Indian capitals as climate talks begin (Reuters)
- Obama: COP21 Paris Climate Talks Could Be ‘Turning Point’ For Planet (BBG)
- China plans to launch carbon-tracking satellites into space (Reuters)
- Scientists Dispute 2-Degree Model Guiding Climate Talks (WSJ)
- At NATO, Turkey defiant over downing of Russian jet (Reuters)
- ECB Left With No Choice But Action After Draghi's Priming (BBG)
Without a rerun of last Friday's Chinese stock market rout, European traders could focus on what "really matters", namely how much of the ECB's upcoming 20 bps rate cut and €20 billion QE expansion (with Commerzbank saying Draghi may even hint at Europe's QE3) is priced in, and whether the ECB's actions are just modestly priced in, or more than fully, and just how big the "sell the news" event will be.The result: the Euro falls to a new 7 month low, the dollar spot index hits a new all time high, and European stocks and US futures stage another remarkable overnight comeback on the usual low volume levitation and central bank intervention.
The arrests or investigations targeting the finance industry in the aftermath of China’s summer market crash have intensified in recent weeks according to Bloomberg, creating a climate of fear among China’s finance firms and chilling their investment strategies. As one professor of Chinese economy noted, "some in the political leadership sought to find scapegoats to blame" for the market crash which along with massive intervention "created uncertainty and anxiety that can only undermine the effort to make these markets work better."
For once, the overnight session was not dominated by weak Chinese economic data (which probably explains why the Shanghai Composite dropped for the second day in a row, declining 1.4%, and ending an impressive run since the beginning of November) and instead Europe took the spotlight with its own poor data in the form of Q3 GDP which printed below expectations at 0.3% Q/Q, down also from the 0.4% increase in Q2, with several key economies rolling over including Germany, Italy, and Spain while Europe's poster child of "successful austerity" saw Q3 GDP stagnate, far worse than the 0.5% growth consensus expected.
In the latest confirmation that China's Politburo is getting far more nervous than it will admit, hundreds of workers at a Hong Kong-owned toy factory in the southern Chinese city of Shenzhen have been protesting since last week after the owner "disappeared," leaving their wages unpaid.
For the third day in a row, China dominated the overnight newsflow with the latest industrial output data, which printed at 5.6% missing expectations of a 5.8% increase, and was tied with March for the lowest print since late 2008.
The PBOC weakened the Yuan fix for the 7th straight day - the longest such streak of 'devaluation' since 2012 - which appears to have helped fuel yet another day of gains for China's most-levered Shenzhen and ChiNext stock indices (even though the USDollar is losing altitude against Asian FX). At the break we note that the lower beta CSI-300 and Shanghai Composite are diverging lower. Meanwhile, over in real economy land, Copper is hitting new lows, nickel is weak, zinc is down, and China Containerized Freight Index just hit a new record low... but when has any of that ever mattered?
As DB so well-puts it, "Welcome to random number generator day also known as US payrolls." Consensus expects 185k jobs to have been added in October but it’s fair to say that the whisper number has edged up this week with slightly firmer US data. It is also fair to say that even if one knew the number beforehand, it would be impossible to know how the market will react.
Global Rally Continues After PBOC "Unintentionally" Sparks Market Surge With Stale News, Largest 2015 IPO PricesSubmitted by Tyler Durden on 11/04/2015 06:59 -0500
The most entertaining overnight story has to do with the latest farcical development in the Chinese "market" when just after open, it was reported that PBOC Governor Zhou said a trading link with Shenzhen will start this year which promptly sent all Chinese brokerages soaring, and the Shanghai Composite jumped over 3%. And then, out of the blue, the PBOC said the undated comments were actually as of May. As Bloomberg put it, "China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015."
China Services PMI Rises (And Falls); Stocks Jump Led By Brokers, Exchanges On Shenzhen Trading Link ResumptionSubmitted by Tyler Durden on 11/03/2015 21:07 -0500
Following Caixin China Manufacturing's 'surprise' jump higher (in the face of the official PMI flat), Caixin Services PMI just beat expectations and bounced considerably to a 'healthy expanding' 52.0 (despite official Services PMI plunge), bringing the Composite PMI to 49.9 - thus proving that billions of dollars of liquidity injections, market interventions, debt transfers to SOEs, arrests, shootings, and general thuggery has fixed China. For now stocks are rallying on this news but offshore Yuan is continuing to leak back to Friday's lows. The biggest gainers are the Chinese brokerages and exchanges (HKEx is up 8%) after PBOC Governor Zhou said a trading link with Shenzhen will start this year.
On a day full of Manufacturing/PMI surveys from around the globe, the numbers everyone was looking at came out of China, where first the official, NBS PMI data disappointed after missing Mfg PMI expectations (3rd month in a row of contraction), with the Non-mfg PMI sliding to the lowest since 2008, however this was promptly "corrected" after the other Caixin manufacturing PMI soared to 48.3 in October from 47.2 in September - the biggest monthly rise of 2015 - and far better than the median estimate of 47.6, once again leading to the usual questions about China's Schrodinger economy, first defined here, which is continues to expand and contract at the same time.
- World stocks on course for best month in four years (Reuters)
- Global Stocks Up Amid Stimulus Hopes (WSJ)
- BOJ Refrains From Adding Stimulus Even as Inflation, Growth Wane (BBG)
- U.S. Avoids Debt Default as Congress Passes Fiscal Plan (BBG)
- China naval chief says minor incident could spark war in South China Sea (Reuters)
- Exclusive Club: No High-Frequency Traders Allowed at Luminex (WSJ)
"In a warren of tiny shops beneath grimy residential towers, a white-haired man selling Snickers bars and fizzy drinks from a kiosk no larger than a cashier’s booth is figuring out a way to move $100,000 out of China"...
Two biggest move overnight came from everyone's favorite carry pair, the USDJPY, which may have finally read what we said yesterday, namely that with the Fed and ECB both doing its job, there is little need for the Bank of Japan to repeat its Halloween massacre for the second year in a row, and as a result will keep its QQE program unchanged. It promptly tumbled from its 121 tractor level, to just above 120.25, where BOJ bids were said to be found. With the FOMC October meeting starting today, the other overnight catalyst was not surprisingly the latest Hilsenrath scribe in which he removed any uncertainty about a Wednesday hike, "leaving mid-December as the central bank’s last chance to raise rates this year."