Yuan

China Sends Hawkish Fed A Message - Devalues Yuan Near 2016 Lows

Just as we warned was probable, The PBOC sent a message loud and clear to the newly hawkish Fed following today's surge in the dollar after the minutes were released. With the 2nd biggest daily devaluation since the August collapse, China pushed the Yuan fix against the USD down to its lowest since early February - barely above the January lows. As we warned earlier, the China-Panic trade looms loud now as turmoil appears all that is left to stop The Fed unleashing another round of liquidity-suckiong rate hikes sooner than the market wants.

The China-Panic Trade Is Back

Once again the fears over China's slowdown, global growth faltering, and the fallacy of US analyst hockey sticks are biting at the ankles of fiction-peddling talking heads. With copper plunging and the USD Index resurgent, as Bloomberg's Mark Cudmore warns, the risk-aversion sparked by China in January is on course for an imminent replay...

Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt

Now, Saudi economic (and liquidity) problems just spilled out into the open, because Bloomberg reported moments ago, Saudi Arabia has told banks it is considering paying some outstanding bills to contractors with government-issued bonds, citing people with knowledge of matter say. Contractors would be able to hold bond-like instruments until maturity.  Bloomberg adds that issuing bonds is one of several options being considered.

Copper Slides To Three Month Low Despite Flat Futures, Oil; Dollar Rise Continues

After two violently volatile days in which the market soared (Monday) then promptly retraced all gains (Tuesday), the overnight session has been relatively calm with futures and oil both unchanged even as the BBG dollar index rose to the highest level since April 4. This took place despite a substantial amount of macro data from both Japan, where the GDP came well above the expected 0.3%, instead printing 1.7% annualized, which pushed stocks lower as it meant the probability of more BOJ interventions or a delay of the sales tax hike both dropped. Meanwhile, in China we got proof of the ongoing housing bubble when new property prices were reproted to have soared 12.4% Y/Y in April, which in turn pushed the local stock market to two month lows amid concerns the rampant housing bubble sector could divert funds from stocks. Yes, China is trading on the "risk" one bubble will burst another bubble.

What Capital Controls? Chinese Buyers Flood US Real Estate Market With $110 Billion

We've chronicled extensively the capital flight taking place out of China and into anything that is perceived to hold value as fears that the yuan will devalue persist (here, here, and here). Now we're able to learn just how much individual wealth has been poured into the United States real estate market over the past few years. According to the study (which excludes most purchases by companies and trusts), Chinese buyers have invested a massive $110 billion into the US real estate market between 2010-2015... and it's expected to double by 2020.

Falling Chinese Demand Could Intensify The Oil War

The days of global reliance on Chinese demand are soon coming to end as seen by the decline in growth rate, decline in imports, and increase in service sector strength. The implications have already been great as stock markets across the developed world fell into peril when China's GDP growth rate fell below 7 percent. Withdrawal symptoms may last for a while until a recovery in demand alleviates some pressure. But global financial markets will have to adjust to a developed China, and as this "new normal" sets in, it will mean softer demand for commodities. China’s slowing demand for oil will lead to heightened competition for suppliers. For now, it appears that OPEC’s loss is Russia’s gain.

"The Global Negative Feedback Loop" - Why Investors Are Fleeing Capital Markets

Investors are fleeing and volumes are falling due to extreme valuations amid global uncertainties related to monetary policy and political decisions made in wake of the 2007-2009 financial crisis. It’s a flight that’s creating a negative feedback loop. "First it’s China, then Japan, then the ECB. When you singe the fingertips of speculators, they don’t like to play anymore," says Brean Capital managing director Russ Certo. Investors "are stewards of other people’s money and they don’t want to allocate capital to a pyramid scheme."

Waves Not Solid Cycles - Echoes Of 2008 Warrant Worries

The current rash of cautious ignorant optimism is so very reminiscent of the period right after Bear Stearns in 2008. Ben Bernanke as late as June 2008: "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Janet Yellen said, “the strong incoming data on spending eased my fears that we are in or are approaching a recession regime” before expressing confidence in rate hikes starting in December 2008! The mainstream takes the absence of further liquidation as if there will be no more liquidations when in fact the likelihood of more of them only rises the more they are artificially “contained.”

China Hard Landing Spreads: Hong Kong GDP Tumbles At Fastest Pace Since Financial Crisis

In the latest indication of contracting global growth, overnight Hong Kong reported that its Q1 GDP fell off a cliff 0.4% qoq, widly missing estimates of 0.1% growth as retail sales plummeted and the property market continued its collapse. On a y/y basis, the economy grew only 0.8% when compared to the same period last year, less than half the 1.9% y/y growth reflected in Q4.

Bloody Start To Friday The 13th For Global Markets

Global stocks have started Friday the 13th on the wrong foot, with not only Hong Kong GDP unexpectedly tumbling by 0.4%, the worst print in years while retail sales fell for a thirteenth straight month in March, the longest stretch since 1999 as the Chinese hard landing spreads to the wealthy enclave, but also following a predicted collapse in Chinese new loan creation, which will reverberate not only in China but around the globe in the coming weeks. The latest overnight drop in the Yuan hinted that should the recent USD strength continue, China will have no choice but to repeat its devaluation from last summer and winter. 

Why Hedge Funds Have Rarely Been More Bearish: Highlights From The SALT Conference

Following last week's Sohn Conference, where the overarching theme was one of prevailing bearishness topped by Stanley Druckenmiller's near-apocalyptic forecast that only gold will be left standing after all confidence evaporates in the "magic people" known as central bankers,  yesterday some 1,800 hedge fund industry executives gathered in Las Vegas at the SkyBridge Alternatives Conference or SALT, where the prevalent concern about the future of the world continued, driven primarily by worries about China.

In China, Nobody Wants To Be A Bagholder

With the frenzied speculation that drove levels and volumes in Chinese commodities off the charts having dawned on everyone from Cramer to Chinese Securities regulators as 'not real', it appears everyone is scrambling to not be the bagholder for this bubble as authorities crackdown on Chinese asset managers pooling retail investor funds, warning of the rise of "ponzi schemes." While nobody knows for sure how much of the trading surge has been driven by individuals, but the evidence suggests retail punters are playing a big role, and as Bloomberg reports, the average holding period for contracts including rebar and iron ore was less than 3 hours in April!

Peter Boockvar Warns "If Central Bankers Get Their Way, The Global Bond Market Will Blow Up"

"My fear is that central banks are now taking this too far through negative interest rates in particular and that they’re going to literally destroy their own banking systems. If they’re actually successful in generating higher inflation, then they’re going to destroy their own bond markets... our government officials, and I will include the Federal Reserve in that, have failed the American people."

The Coming War Of Central Banks

History has shifted, and we're leaving the era of central bank convergence and entering the era of central bank divergence, i.e. open conflict.

Goldman Closes "Short Gold" Recommendation With 4.5% Loss; Will Continue Buying Gold From Its Clients

Iit took just two and a half months for Goldman to get officially stopped out of its short gold recommendation, which as we first noted, happened on April 29, when its the price soared above $1,300 breaching Goldman's stop. Officially, Goldman's Jeff Currie decided to take his time, although he too finally threw in the towel today admitting Goldman was wrong yet again with one more trading recommendation (recall that Goldman had earlier been stopped out and lost money on 5 of its Top 6 trades for 2016 in just over a month).