Transparency

Perhaps after intervening every single day in the past week (remember that FT piece saying the PBOC would no longer directly buy stocks... good times) in either the stock or the FX (both on and offshore) market, China needed a day off; perhaps even the algos got tired of constantly spoofing the E-mini and inciting momentum ignition, but for whatever reason the overnight session has been oddly uneventful, with no ES halts so far, few USDJPY surges (then again those come just before the US open), and even less violent CNY or CNH moves, leading to virtually unchanged markets in Japan (small red) and China (small green). And while the initial tone in Europe has been modestly "risk off", it is nothing in comparison to the massive gyrations that have become a stape in the past few weeks.

Kerry reportedly assigned an “email czar” in an effort to ensure that the State Department promptly responds to an onslaught of record requests without directly undercutting Clinton and the Democratic Party’s presidential front-runner. Kerry could not have picked a better team player. Janice Jacobs is a big Clinton fan who contributed $2,700 to the Hillary for America presidential campaign fund, Federal Election Commission records obtained by JW show. Can we really expect her to be fair and objective as the new gatekeeper of Clinton’s records?

Late last month, tens of thousands of Malaysians donning banned yellow attire took to the streets in Kuala Lumpur to call for the ouster of Prime Minister Najib Razak whose government has been accused of obstructing an investigation into how some $700 million from a Goldman-backed development bank mysteriously ended up in Najib’s personal bank account. As it turns out, the story goes well beyond Goldman and Najib. As WSJ reports, the 1MDB debacle takes us deep into the shadowy world of sovereign wealth funds where it appears as though someone told a $1.4 billion lie...

Fool me once, shame on me; fool me twice, shame on you; fool me a third time, you must think we are all just idiots!! Following The ECB's Benoit Coeure "internal procedure error" where he leaked the imminent actions of the central bank to a group of well-heeled hedge fund managers - who proceeded to dump EURUSD ahead of the announcement, The ECB has decided - in all its arrogant wisdom - to decamp to Luxembourg to speak, once again, to participants in the world of high finance behind closed doors. The media aren’t invited (though the ECB will publish some prepared remarks from the board members.).

Despite the liberal media spinning Hillary's non-apology as bringing her closer to the American public, it appears her presidential campaign took another shot to the chest this weekend. Not only does Bernie Sanders keep rising in the polls, Republican presidential front-runner Donald Trump leads Hillary Clinton head-to-head, garnering 45% support versus 40% of his Democratic rival, according to a new national poll.

News That Matters

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

Given the global implications of what’s going on in China’s stock market and the fact that the yuan devaluation is set to accelerate the great EM FX reserve unwind while simultaneously driving a stake through the heart of beleaguered emerging economies from LatAm to AsiaPac it’s wholly understandable that everyone should focus on equities and FX. That said, understanding the scope of the risk posed by China’s many spinning plates means not forgetting about the other problems Beijing faces, not the least of which is a massive collection of debt.

For years, many had mocked both European and US stress tests as futile exercises in boosting investor and public confidence, which instead of being taken seriously repeatedly failed to highlight failing banks such as Dexia, Bankia and all the Greek banks, in the process rendering the exercise a total farce.  The implication of course, is that regulators, thus central bankers, openly lied to the public over and over just to preserve what little confidence in the system has left.  Now we know that this is precisely the policy intent: as Reuters reports citing a paper co-authored by a Bundesbank economist, "banking supervisors should withhold some information when they publish stress test results to prevent both bank runs and excessive risk taking by lenders."

In other words: lie.

This nation has become a land where character and integrity are secondary to profits for the few and self serving interests of the powerful.  And as we are seeing already for the third time in this millennium’s infancy, stability and prosperity can be but short lived for even the highest paid CEO’s in such a world.

The latest set of Clinton e-mails released by the State Department reveals another 125 exchanges that contain classified information, establishing further (for anyone who still had doubts) that sensistive information was indeed transferred over Clinton's home e-mail server and leading to two rather obvious questions: 1) will Clinton be held accountable?, and 2) will her campaign be able to hold the 2016 Presidential bid together amid a rising tide of public mistrust?

Call it the rigor mortis of the robo-machines. About 430 days ago the S&P 500 crossed the 1973 mark for the first time - the same point where it settled today. In between there has been endless reflexive thrashing in the trading range highlighted below. As is evident, the stock averages have not “climbed” the proverbial wall of worry; they have jerked and twitched to a series of short-lived new highs, which have now been abandoned. Surely most thinking investors have left the casino by now. So what remains is chart driven trading programs, racing madly up, then down, then back up again - rinsing and repeating with ever more furious intensity.

• Charting the Market: New Month, Same China (BBG)
• China jitters send stocks tumbling (Reuters)
• Oil falls on weak China factory data (Reuters)
• Euro zone factory growth eases in August despite modest price rises (Reuters)
• Euro-Area Joblessness Falls to Lowest Level Since Early 2012 (BBG)
• Clinton friend advised on U.S. politics, foreign policy (Reuters)
• Korea exports slump as Asia's woes deepen (Reuters)

Attempts to explain exactly what happened last Monday when prices for a whole host of ETFs and mutual funds diverged markedly from fair value abound and while there's no way to know for sure exactly what went wrong, FactSet has drawn some tentative conclusions after conducting a bit of "voodoo, tea-leaf reading."

• China’s Central Bank Cuts Interest Rates (WSJ)
• Chinese Stocks Crash Again to Extend Biggest Plunge Since 1996 (BBG)
• China cuts rates, reserve ratio to aid economy as stocks sink (Reuters)
• Wall St. suffers worst day in four years, S&P confirms correction (Reuters)
• Europe's Stocks Head for Best Day Since 2011 (BBG)
• Market turmoil clouds Fed rate outlook (FT)
• For All Its Heft, China’s Economy Is a Black Box (WSJ)