With growth rates for steel products at or near record lows and prices for end-product having plunged to record lows, it is little surprise that the Steel industry would provide the largest Chinese bankruptcy yet in this cycle. As Bloomberg reports, unlisted Haixin Iron & Steel - which halted production and defaulted on CNY3 bn in March - has started bankruptcy proceedings. Having spent 8 months hoping for the government bailout that every Western onlooker believes is every firm's god-given right, a reorganization application for the Wenxi, Shanxi province-based company (with $1.7 billion of total debt) was accepted by the Yuncheng City Intermediate People’s Court. This is just the start as "Haixin Group’s bankruptcy will be followed by others," warns one analyst, adding that the major flaw of producers of iron ore, the most traded commodity after oil, is they tend to be “over-bullish.”
Once again all eyes are on the carry-trade driving Yen, whose avalance into oblivion is picking up speed, and where the formerly unimaginable USDJPY level of 120 as presented here in September, is now looking like this week's business, with the only question how long until Albert Edwards' next target of 145 is hit leading to nuclear currency warfare between Japan, Korea, China and ultimately, the US and Europe. Unfortunately, for Japan, at this point the terminal currency collapse will do nothing to incrementally boost exports or its economy, and the former Japan finmin was on the tape warning again that the Japanese recession will persist as USDJPY over 115 is now hurting Japan, something which should by now have been clear to most.
- Japan Prime Minister Shinzo Abe Calls Snap Election (WSJ) - as repeatedly priced in...
- Flash Boys Raising Volatility in Wild New Treasury Market (BBG)
- Not Greece again: Greek Bailout Review Stalls as Troika Demands Final Steps (BBG)
- Iran uses China bank to transfer funds to Quds-linked companies (Reuters)
- Porn Mags With Free Madrid Theater Tickets in Tax Protest (BBG)
- Hong Kong, China stocks ease on profit-taking after stock connect launch (Reuters) - Hang Seng down 500 points in past 2 days
- Halliburton Mega-Deal Sealed by CEOs Over Coke and Coffee (BBG)
- Wall Street to Reap $316 Million From Day of Mega Deals (BBG)
- Mass murderer Charles Manson gets marriage license, state says (Reuters)
After weeks of relentless flashing red headline barrage whose only purpose was to force snap algo buying of the USDJPY pair time after time after time, Japan is once again out of FX algo danging carrots after moments ago Abe confirmed what everyone had known already: he called a snap election to seek a mandate for his decision to delay by 18 months a further sales-tax increase that had been planned for next year; he also said he would dissolve the lower house of parliament on Nov. 21 in preparation for an election in December, without specifying a date. Cited by the WSJ, Abe said "To ensure the success of Abenomics, I’ve concluded that it shouldn’t be carried out next October and instead be postponed by 18 months,” the prime minister told a nationally televised news conference, stressing that the additional tax burden would risk putting the economy back into deflation. “I will seek the people’s judgment over our economic policy."
- Scuttled deals worth $580 billion put hedge funds on back foot (Reuters)
- Mounting Pressure on OPEC Spurs More Wagers on Oil Rally (BBG)
- It's not just US real estate: Chinese Students at U.S. Universities Jump 75% in Three Years (BBG)
- Frankfurt Open for Yuan Clearing as Liquidity Rises (BBG)
- Obama defends healthcare law after adviser criticism (Reuters)
- Michael Hasenstab Bets Big in Controversial Places (WSJ)
- Facebook seeks foothold in your office (FT)
- Russia Seen as Greatest Threat in Poll as Oil Erodes Putin Power (BBG)
- Falling Oil Prices Test OPEC Unity (WSJ)
Perhaps the biggest shock following last night's completely expected and very predictable (previewed here over a month ago) Japanese slide into triple- (actually make that quadruple) dip recession, is that it took the BTFTripleDip recession algos as long as they did to recover most of the overnight futures losses. Because after surging to 107 on a confused short squeeze kneejerk reaction, the USDJPY subsequently tumbled 150 pips to 105.50 as rationality briefly emerged, and the market wondered for a few brief hours if rewaring the destruction of one's economy is actually a prudent thing. Then, however, when European traders started walking into work, the now default USDJPY levitation on no volume came right back, and with that the correlation algo buying of E-mini futures, no doubt helped by the Bank of Japan itself taking advantage of the CME's ES liquidity rebate program. Because without confidence as expressed by the lowest and only common denominator left - global equities - there is nothing else.
Brace yourselves, the zero sum game is on like Donkey Kong.
Our world, our life, has been built on debt and propaganda for many years. They have kept us from noticing how poorly we are doing. But now a third element has entered the foundation of our societies, and it’s set to eat away at everything that has – barely – kept the entire edifice from crumbling apart. Deflation.
- "The hate us for our..." Americans’ Cellphones Targeted in Secret U.S. Spy Program (WSJ)
- Ukraine and Russia take center stage as leaders gather for G20 (Reuters)
- Moscow and Kiev trade accusations; U.S. warns Russia against escalation (Reuters)
- Heartland Central Banker Calls Asset Bubbles Top Concern (BBG)
- U.S. Said to Give Banks December Deadline in FX Probe (BBG)
- Series of Failures Enabled White House Breach, Report Finds (WSJ)
- Yen plumbs seven-year trough on likely Japan sales tax delay (Reuters)
- JPMorgan Chase Bankers Said to Lead Moscow Departure (BBG)
The key event overnight was the release of European Q3 GDP data, which saw Germany averting a recession by the narrowest of margins when following a -0.2% drop in Q2 economic growth, Germany grew by the smallest amount possible in Q3, or 0.1%, in line with expectations, thus averting two consecutive quarters of decline, the technical definition of a recession. The French economy likewise posted a modest increase in Q3, although one wonders how aggressively the data had to be fudged for a country whose PMIs all indicate a -1% or greater contraction. Italy however was less creative with its use of "hookers and blow", and continued its recession with a 3rd negative print, contracting at -0.1% as expected, while Portugal also missed third quarter growth estimates.
Kuroda has fired the shot that looks likely to trigger the next phase of the crazy monetary experiment we’ve all been living in for the last five years. Unfortunately, the next phase is where things start to get nasty. Just because equity markets cheered the latest sugar rush he guaranteed them should not make smart investors lower their guard — quite the opposite, in fact. Colonel Kuroda has gone up-country into the Heart of Darkness, and all we can do is await the Apocalypse now.
Throughout history, in most cases of economic collapse the societies in question believed they were financially invincible just before their disastrous fall. Rarely does anyone see the edge of the cliff or even the bottom of the abyss before it has swallowed a nation whole. This lack of foresight, however, is not entirely the fault of the public. It is, rather, a consequence caused by the manipulation of the fundamental information available to the public by governments and social gatekeepers.
Would it be that bad? Of course it would, he’s is a communist.
- Banks to Pay $3.3 Billion in FX-Manipulation Probe (BBG)
- Symbolic being the key word: U.S., China sign symbolic emissions plan, play down rivalry (Reuters)
- Europe (so really Russian sanctions) is the new "snow in the winter" - Carney Sees Europe Stagnation Impact as Growth Outlook Cut (BBG)
- Eurozone Industrial Output Points to Weak Third Quarter Growth (WSJ)
- Not everyone around Abe is insane: Kuroda Ally Flags Warning on Delaying Sales-Tax Increase (BBG)
- Hong Kong to scrap daily yuan conversion limit to boost stock investment (Reuters)
- Barclays Falls After FX Settlement Delay Reduces Discount (BBG)
- Some unhappy Yahoo investors asking AOL for rescue (Reuters)
Currency wars are set to warm up again, after Japan's radical decision to further debase its currency through an intensification of already significant monetary easing. There was a palpable coldness from China's Premier Xi Jinping as he greeted Japan's President Abe at the APEC summit in Beijing.