Yuan

The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.

Despite last night's disappointingly weak China re-open (notably less than US ADRs had implied), it appears everyone and their pet rabbit levered up as China margin-buying rose CNY21bn - the most in 2 months. It appears China's housing market also disappointed hope-strewn expectations as Golden Week home sales slowed dramatically YoY (blamed on weather). All is not well in the liquidioty stress department as despite ongoing injections, o/n HIBOR spiked 240bps overnight. China stocks are mixed at the open as PBOC strengthens the Yuan fix for the 5th day in a row to 2 month highs. Concerns are also growing in China's corporate bond market where bubble flows have greatly rotated from stocks to drive yields on risky firms to record lows.

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It was supposed to be the day China's triumphantly returned to the markets from its Golden Holiday week off, and with global stocks soaring over 5% in the past 7 days, hopes were that the Shanghai Composite would close at least that much higher and then some, especially with the "National Team" cheerleading on the side and arresting any sellers. Sure enough, in early trading Chinese futures did seem willing to go with the script, and then everything fell apart when a weak Shanghai Composite open tried to stage a feeble rebound into mid-session, and then closed near the day lows even as the PBOC injected another CNY120 bn via reverse repo earlier.

After a "no change" statement from The BoJ, today's dismal Japanese data was terrible enough to be great news in the new normal as August machine orders drop the most in at least a decade and stocks, USDJPY dipped and ripped. However, it was the China open that investors waited for (after China shares rising 10% in US trading, and CNH strengthening on lower than expected reported outflows) as Goldman slashed its 12m target for Chinese stocks, and Bocom's chief strategist (who called the boom and the bust) says "rally is mirage of new dawn, volume is dying, sell the rallies." PBOC fixed the Yuan at its strongest in 2 months and while Chinese stocks opened up notably it was less than US ADRs suggested (CSI +4% vs ASHR +9.5%).

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The takeaway is that to the extent the overnight relief rally in the ringgit and then subsequently in other Asia EM "assets" was catalyzed by a "better" than expected read on the situation in China, the market may be making a mistake because just like Chinese GDP prints, the headline figure on the PBoC's store of FX reserves should be taken with a grain (or perhaps a whole shaker) of salt when it comes to drawing conclusions about the pace of outflows from the world's second most important economy.

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The big overnight story was certainly the BOJ's announcement at 11pm Eastern whether or not the Japanese central bank would boost QE. This is how we previewed it: "now all eyes to the BOJ when tonight around 11pm Eastern, Japan's central bank is expected do and say precisely... nothing." Sure enough, nothing is precisely what the BOJ delivered, leading to a big, if brief tumble in the USDJPY suggesting many were expecting at least a little tip from the BOJ.

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"The data are positive for the probability of the yuan getting into the SDR basket. It shows that the so-called devaluation in August, which wasn’t massive in value, hasn’t driven people away from using the yuan."

• Asian shares rise on fading Fed rate views (Reuters)
• U.S. Equity Futures Fall, Risking S&P 500 Rally as Copper Slides (BBG)
• More biotech pain, this time from the WSJ: For Prescription Drug Makers, Price Increases Drive Revenue (WSJ)
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• Russia Rejects No-Fly Zone Over Syria as Clerics Urge Reprisals (BBG)
• Historic Pacific trade deal faces skeptics in U.S. Congress (Reuters)
• German Factory Orders Unexpectedly Fall Amid Economic Risks (BBG)

The best headline to summarize what happened in the early part of the overnight session was the following from Bloomberg: "Asian stocks extend global rally on stimulus bets." And following the abysmal data releases from the past three days confirming that the latest centrally-planned attempt to kickstart the global economy has failed, overnight we got even more bad data, first in the form of Australia's trade deficit, and then Germany's factory orders which bombed, and which as Goldman said "seems to reflect genuine weakness in China and emerging markets in general and this will weigh on the German manufacturing sector."

Unfortunately, we are used to politicians saying whatever they think they need to say to be elected president, and falling way short of their campaign promises on the job. Even scarier would be the notion of selling America to the craftiest bidder. The election may be more than a year away, but isn’t it time to dig beneath the carefully crafted persona that is Trump and unearth the person and the full spectrum of his business dealings? To see the real Donald Trump is to plunge into all the conflicts of interest he denies, the financial tricks he dispenses, the crucial details he obfuscates, and the flimflam he offers up day in, day out.

The demise of the petrodollar continues unabated in the face of depressed crude, regional proxy wars, and a budget bleed, as the Saudis burn through the SAMA piggy bank in a desperate attempt to keep the ship afloat.