Emerging Market Rout Continues In Overnight Trading

Tyler Durden's picture

A slew of favorable overnight news, including a stronger than expected German IFO business climate print, reports that Draghi has signalled he would be prepared for the ECB to buy packages of bank loans to households and companies, when he said "the ECB might be able to buy securitised bank loans if they could be packaged as asset-backed securities in a transparent manner" (a QE-lite will hardly make the market happy), a largely expected bail out of the Chinese Trust Equals Gold imminent default (more in a subsequent post), as well as the announcement of Argentina's new liberalized dollar purchase capital controls (which have a monthly purchase limit as well as a minimum income threshold), not to mention the traditional USDJPY levitation which drags all risk along with it, were unable to put an end to the ongoing rout in emerging markets, which saw the Turkish Lira collapse to fresh record lows before it jumped on news the Turkish Central Bank would hold an extraordinary meeting tomorrow (if the recent intervention by the CB is any indication, watch out), not to mention the Ruble, Zloty and even the Ukraine Hryvna dump as the outflows from EMs continued over a mixture of tapering fears as well as concern that the one way fund flow would accelerate creating its own positive feedback loop.

Is today the day the fund flow exodus will finally be halted? Stay tuned to find out and keep a close eye on the USDJPY - the most manipulated, confiduing-boosting "asset" in the world right now, more so than gold even.

Overnight headline bulletin

  • Treasuries decline to start the week in partial reversal of last week’s haven flows that sent 10Y yields to lowest since mid-Nov.; first U.S. auction of floating- rate notes tomorrow, Fed decision Wednesday amid expectations QE will be pared by another $10b.
  • Industrial & Commercial Bank of China Ltd. said investors in a troubled high-yield trust can recoup their funds, averting a threatened default that underscored concern over the shadow- banking system and helped spur a selloff in emerging-market currencies and stocks
  • China’s trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months
  • China’s one-year interest-rate swap fell to the lowest level in more than a month on speculation the central bank will seek to bring down funding costs to support a slowing economy and curb the risk of defaults
  • German business confidence as measured by the Ifo institute rose to the highest level in more than two years, reaching 110.6 in January from 109.5 in December
  • U.K. business leaders attacked the opposition Labour Party’s plan to raise the top rate of income tax to 50% as a “backward step” that would damage the economy and put jobs at risk
  • Ukraine’s political crisis deepened over the weekend as President Viktor Yanukovych’s offer to share power with the opposition failed to end anti-government unrest, raising the stakes for a special parliament session tomorrow
  • Republican lawmakers said Obama risks antagonizing an already polarized Congress by threatening to use executive authority to make good on the policy agenda he will outline in his State of the Union address
  • Sovereign yields mixed; Greek yield surge while U.K. 10Y yields decline; EU peripheral spreads narrow. Asian equity markets slide, Nikkei -2.5%, Shanghai -1%; European markets lower, U.S. equity-index futures post slight gains. WTI crude, copper higher; gold falls

More on what has transpired in global capital markets overnight from RanSquawk:

The release of better than expected German IFO survey, together with reports that ECB’s Draghi has signalled that he would be prepared for the ECB to buy packages of bank loans to households and companies failed to support stocks this morning, which traded lower since the get-go after BG Group (-15%) cut forecast and AT&T declared that it does not intend to make an offer for Vodafone (-5%). As a result, the FTSE-100 index underperformed its peers, with telecoms as the worst performing sector in Europe, closely followed by oil & gas. Also of note, Banca Popolare di Milano shares came under significant selling pressure this morning, which consequently weighed on other small Italian banking names after the bank approved capital hike of up to EUR 1.5bln.

Looking elsewhere, despite the risk averse sentiment, Bunds traded lower, as the looming supply, together with lack of any meaningful credit spread widening weighed on prices. At the same time, EM markets remained in focus, with pressure on TRY and others amid concerns over capital outflow.

Going forward, market participants will get to digest earnings by tech giant Apple and industrial heavy weight Caterpillar, as well as the release of the latest US New Home Sales report.

Asian Headlines

China credit trust have reached a pact to sell trust assets. China Credit Trust previously told investors it is in talks to raise the funds to pay off debts prior to maturity, which would otherwise lead to a landmark default in China's shadow-banking sector. It was then later reported investors in Chinese trust marketed by ICBC are to get repayment offer. (BBG)

EU & UK Headlines

German IFO Business Climate (Jan) M/M 110.6 vs. Exp. 110.0 (Prev. 109.5)
- German IFO Current Assessment (Jan) M/M 112.4 vs. Exp. 112.4 (Prev. 111.6)
- German IFO Expectations (Jan) M/M 108.9 vs. Exp. 108.0 (Prev. 107.4)

ECB President Draghi signalled that he would be prepared for ECB to fight deflation in Europe by buying packages of bank loans to households and companies. (FT) When asked on QE, Draghi said “I’m not saying it should or it should not be done, but the ECB might be able to buy securitised bank loans if they could be packaged as asset backed securities in a transparent manner. (BBG/RTRS)

Barclays preliminary pan-Euro agg month-end extensions: +0.12y (12m avg. +0.07y)
Barclays preliminary Sterling month-end extensions:+0.19y

US Headlines

Going forward, market participants will get to digest earnings by tech giant Apple and industrial heavy weight Caterpillar, as well as the release of the latest US New Home Sales report.

Barclays preliminary US Tsys month-end extensions:+0.06y (12m avg. +0.07y)


The FTSE-100 index underperformed its peers since the open this morning, with Vodafone and BG Group under heavy
selling pressure. At the same time, financials remained out of favour amid the ongoing concerns over EM markets, together with reports that Italian listed Banca Popolare di Milano approved capital hike of up to EUR 1.5bln.

However, unlike last week, this failed to lead to aggressive credit spread widening and instead spreads remained tighter, likely supported by reports citing Draghi who said that the ECB is ready to buy packages of bank loans to households and companies.


EM currencies remained under pressure this morning, with the spot TRY rate advancing to a fresh record high before reports that the Turkish central bank to hold an extraordinary meeting tomorrow sent the pair lower. However, other EM currencies such ZAR continued to weaken against the USD, rising to its highest level since October 2008 this morning.

Elsewhere, despite the ongoing concerns over EM outflows, USD/JPY remained bid, with the 1-month implied vol rate also better bid as the pair traded in close proximity to what is said to be a large option expiry level at 102.50.

The Turkish economy minister has said an economic crisis in the country is impossible, adding that the central bank has sufficient reserves to serve the market. (BBG)


Morgan Stanley sceptical 'blow-out' in WTI-Brent is imminent and sees narrowing of WTI-Brent instead of widening. (BBG)

Indian government officials, Chidambaram and Bose, have said gold smuggling has risen in India and that India can revisit gold import curbs by end of this fiscal year, once current account deficit is controlled. (BBG)

Deutsche Bank wants to sell its place in the global gold and silver setting process, and is talking to prospective buyers, sources familiar with the situation said on Friday. (RTRS)

Fitch said Chinese aluminium prices are to remain low for the next 2 years. (BBG)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Keyser's picture

And yet US futures are pointing higher at the open after the sell off in Asia and Europe. 

GetZeeGold's picture



Toss the keys to Yellen and get the hell out of there Ben Shalom!

Sudden Debt's picture

Proof that Asia should also legalize weed!

Racer's picture

Just as I thought last night

"PPT will be out in force tonight bombing gold and buying as many futures as they can (and gifting China more cheap gold)"

So predictable... overnight rampathon on futures and hammer gold

new game's picture

all i see is moar debt to keep the train on the tracks.

only solution the contol freaks have...

all aboard the train to a place visited by history.

order a drink, sit back and don't look out the window...

Pinche Caballero's picture


NR, remember him? At least he dodged THAT bullet.

Seriously, though, +1.

'Til the bitter end, fuck you TPTB.

DirkDiggler11's picture

I get the feeling that US futures Markets in the "Green" this AM are just a Venus Flytrap trying to suck in capital from foreign markets that is running scared.
Watch, less than 30 Min from the opening US markets will suddenly turn on another "non-news" event and go into the red continuing their retreat for now. Everything these days are false flags, false data, and false positioning. Volume in the US markets has dried up like Kalifornia, and the positive futures are nothing more than a false front to pull in other capital as all of the US sheep have already been fleeced.

AdvancingTime's picture

If investors in Japan's government bonds begin to believe that Abenomics will be successful in dropping the value of the yen and in bringing back inflation it would be logical for owners of  JGBs to move out of the securities and buy foreign bonds or equities. That would place upward pressure on Japanese bond yields and raise the cost of government to service its massive debt. With the BOJ  set to absorb half of the government bonds planned for sale this fiscal year, domestic investors have already started venturing overseas for higher yielding assets. If this turns in to a tsunami of  money fleeing Japan it will constitute the end of the line for those holding both JGBs and the yen. More on Japan going forward in the post below,


disabledvet's picture


Bearwagon's picture

As I already mentioned: This is the new normal, people. So, let me rant a bit:
In the early days of parlamentarianism the ideal as well as the reality of classic parliamentary debate was formed: Highly cultured and highly intelligent artists of heightened elocution interchanged witty thoughts in brilliant speeches.
It was an intellectual delight and often a personal gain to listen to them. The discourser often succeeded in convincing the audience of his arguments, so haunting that the listeners could agree in the end, or at least had great respect for the speaker.
This sort of brilliant parliamentary debate does not exist anymore. It is dead and gone.It has  irretrievably been sacrificed on the altar of party competition.
The classic convincing debate as an instrument to form an atmosphere of constructive debate has been eradicated by the influence of the political party-system and caucuses. It has vanished from TV and radio - because there ain't nobody left in the parliament who has to be persuaded. Each and everyone is already a willing partisan of his own parliamentary group.
Such discussions and the negotiation of laws are in fact nothing more than shadowboxing. It's all just show. Because the decisions have long been been taken before the debate even was started.
Democratic discourse  has degraded into sheer eristic, into dumb bossiness. To convince others is no longer the point. All positions persist somehow or other and cannot be shattered by rhetorics, be they compelling or not. To gain or change a majority isn't the point neither. They have long been certain. The decisions have been made, and they are unshiftable before the debate has even begun.
In fact it would not be necessary to have a discussion at all, because the whole debate won't change the already taken decision the slightest bit. To legitimate the decisions, already taken in parties, parliamentary groups or elsewhere out of sight, that's the sole point of every such debate. The keyword is no longer  "parliamentary debate at the highest stage", but merely "exchange of blows".
We got nothing to expect from that direction!

PowerPlayer's picture

I'm sorry, but the dumb anchor on CNBC keeps mentioning the Polish Zloty this morning as well.  I'm looking at a chart of the Polish Zloty and it made its lows against the $US last July.  The Polish Zloty made a 12 month high against the $US in December it isn't much off those highs now.  


I expect this stuff from CNBC, but why on earth is the Polish Zloty being mentioned in the same sentence as the Turkish Lira and the Ukraine Hryvna on Zerohedge?  We all know that Argentina, Venezuela, Ukraine, and Turkey are completely dysfunctiona statesl, but why on earth is Poland being mentioned along with those countries?   

alus's picture

Don't worry - these people called 'bankers' don't even know where's France, Japan or any other country are placed on the map. They do what they can understand. If their brokers say Poland is still 'emerging market' so it must be true. They didn't even checked the economy indicators shown that this country is currently at 22th position between all the countries on the world of the wealthness overtaking Netherlands, Belgium, Sweden, Austria or similar 'developed' countries .

Hindenburg...Oh Man's picture

whew...NASDAQ futures up .30 percent. Back to normal. Thank goodness we had that 1-2 percent "correction" on the NASDAQ and it's over, smooth sailing ahead, markets upward and onward. 

Pinche Caballero's picture

Far be it for me to try and speak intelligently on the ins-outs of high finance, but as a former Sheeple, I at least can sense the growing anticipation of something big brewing, the result of (+/-) three generations worth of general fucked-up-edness by all involved, a possibly bright future squandered.

Back when the Big Three networks controlled the story line, I intuitively felt all was not well. The vast majority of us common folk would have had no clue. Little did I know then how prescient the kookey talk of fiat currencies, PMs as a store of wealth, and avoiding debt, really was. However, with the advent of this Intranets thing-ey and the world's knowledge at my fingertips, to actually get to peak behind the curtain has been revealing. It all appears cartoonish, like when the lever breaks in the conductor's hand on a train barreling down the tracks! Now everyone along for the ride is just grabbing for anything they can hold on to!

Many thanks to everyone here, for forewarned is truly forearmed.

Way back when, I could never have imagined the state of things today. Little did I know I was being purposefully bamboozled.

Logical Song


Bring it, Motherfuckers!

fijisailor's picture

I smell QE farts this morning.

...out of space's picture

Deutsche Bank wants to sell its place in the global gold and silver setting process,

what that mean? what place? in LBMA gold and silver (rigging) fixing?

and is talking to prospective buyers, 

Who is a buyer? chinese?

sources familiar with the situation said on Friday

yea source shoud know

Liquid Courage's picture

Terribly sorry to go all GrammNaz on you there Tyler old bean, but it seems you’ve fallen afoul of the principle danger one faces when creating one of those elaborate, labyrinthine run-on sentences of which you seem so fond. Amidst the riotous canoodling of subordinate clauses, you’ve lost sight of the principle parts of the sentence: the subject and its predicate.

Shorn of all its extraneous bits, this is the core of the sentence:

A slew of favorable overnight news were unable to put an end to the ongoing rout in emerging markets...

A collective noun (singular) followed by a few examples (subordinate adjectival clauses) still takes a singular verb. It seems I hear this just about every time I watch a news cast these days.

So, it’s all in good fun trying to create these convoluted monstrosities - this one clocked in at 122 words (some kind of record, no doubt) - yes, all in good fun until someone gets an eye put out by a protruding adjectival clause or a madly gesticulating gerund. So let’s be a bit more careful in future, shall we?