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Futures Soar On Hope Central Planners Are Back In Control, China Rollercoaster Ends In The Red
For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw a coordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday's losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.
As Bloomberg's Richard Breslow comments, the majority of Asian equity indexes finished with losses but on an upbeat note, helping most European markets to start with modest gains that have increased with the morning, thanks to the aforementioned domestic and global mood stabilization. S&P futures have been positive all day other than a brief dip negative at the worst of the day’s China levels. Chinese equities opened quite weak and were down another 5% before the authorities assured the market that speculation they would withdraw from market supportive measures was misguided. This began a rally of over 6% before a mid-afternoon swoon.
There was the usual propaganda out of China, which requested traders rat out any "malicious sellers" and appears to have been inundated with responses...
BREAKING: China's securities regulator has received reports about "massive selloff" yday in stock market, will take actions soon - spokesman
— George Chen (@george_chen) July 28, 2015
... mixed with the facts that China also reported that margin leveraged positions were reported to have been reduced on Monday by the most in two week. Additionally, the PBOC injected CNY 50 billion worth of funds, marking the 10th consecutive injection of liquidity by the central bank.
There was some discussion early over comments by Tom DeMark, popular for predicting the 2013 bottom in the Shanghai Composite, who wrote that "Chinese stocks will decline by an additional 14% over the next three weeks as the market demonstrates a trading pattern that mimics that of the U.S. crash in 1929."
More troubling was the WSJ's assessment that the continuing "losses are casting doubt on Beijing’s ability to contain the slide, and has left investors and analysts wondering what officials might do next to reverse it.
Whether the government’s rescue measures are successful or not hinges on performance through the rest of the week, said Zhou Xu, an analyst at Nanjing Securities. “The market consensus that the bottom line for the government is around the 3400 point. If the market slides further, it will be a real disaster.”
Government measures to step up purchases of stocks, announced late Monday, appeared to reassure some investors shaken earlier by the steep losses the day before, when the Shanghai benchmark fell 8.5%. That marked its worst one-day percentage decline since 2007.
On Tuesday afternoon, China’s securities regulator announced it would launch an investigation into Monday’s selloff.
“Right now the [Chinese] central government is trying to maintain the confidence of the individual investors” that drive China’s stock market, said Castor Pang, head of research for Core Pacific-Yamaichi International. If the government “can maintain their confidence, everything can be solved.”
Good luck China, your dazed and confused central planning overlords need it now more than ever.
Elsewhere, the Nikkei 225 (+0.1%) saw a choppy price action, led by sentiment in China. Finally, JGBs traded higher following spill over buying in USTs and Bunds.
With Macro news fairly light in terms of Europe, price action today has shrugged off the ongoing tensions surround the volatility in Chinese equity markets, to focus on stock specific news and specifically earning season, with indices trading higher (Euro Stoxx: +1.1%) supported by consumer discretionary sector following an encouraging earnings report by Kering (7.0%), with a weaker EUR continuing to provide supportive tailwind. The risk on sentiment ensured that Bunds edged lower, with T-Notes moving in sympathy, while peripheral bond yield spreads narrowed, albeit marginally.
In FX, there was little in terms of macroeconomic data, but the advanced UK GDP report came in line with estimates at 0.7% Q/Q and 2.6% Y/Y and has seen GBP supported despite a stronger USD weighing on other major pairs . The USD-index resides in positive territory (+0.2%) to pare back some of yesterday's losses with price action relatively subdued during the European Morning.
Looking ahead, today sees the release of the latest US services and composite PMIs, consumer confidence report and S&P/Case-Shiller House Price Index. Also of note, Greek negotiations with creditors are set to kick off today after a week long delay due to logistical issues, while the FOMC are also set to begin their 2 day meeting today, with a rate decision scheduled for tomorrow.
Brent and WTI head into the NYMEX pit open trading firmly in negative territory as bearish sentiment continues, with Brent Crude at its lowest level since Feb 2nd , weighed on by firmer USD as well as ongoing concerns surrounding the economic slowdown in China. The latest DOE estimates have stockpiles for Crude, Cushing OK, Gasoline and Distillate all show a build, while participants will be looking out for today's API Crude oil inventories (Prey. +2300K). NatGas has bucked the trend of the as a spate of hotter Weather is about to hit the eastern coast of USA. Gold trades in modest negative territory, however remaining below the USD 1100 handle.
Today's US earnings include 40 S&P500 companies among which Merck, Ford, Reynolds American and Pfizer pre market, with Twitter and Gilead scheduled to report after market. This afternoon the two-day FOMC meeting begins today while data wise we get the flash composite and services PMI’s for July, S&P/Case Shiller house price index, consumer confidence and finally the Richmond Fed manufacturing activity reading.
Bulletin headline summary from Bloomberg and RanSquawk
- European equities trade in positive territory, taking the lead from earnings specific news.
- USD is stronger against most major pairs with the exception of GBP, which saw strength after Q2 GDP printed in line with expectations
- Today's highlights include US services and composite PMIs, consumer confidence report and the latest API crude oil inventories after the closing bell on Wall Street with earnings expected from Pfizer, Gilead Sciences and Merck.
- Treasuries decline before Fed begins two-day meeting in Washington and week’s auctions begin with $26b 2Y notes; WI 0.695%, highest since Dec., vs 0.692% in June.
- Economists remain somewhat divided over when Fed will begin to hike rates after this week’s FOMC meeting, though most see Sept. liftoff, based on published research
- Chinese stocks extended yesterday’s losses, with the Shanghai Composite closing with a 1.7% loss after sinking as much as 5.1%
- China’s securities regulator is investigating yesterday’s stocks selloff, the latest effort by the government to crack down on reports of market manipulation after a recent equities rout wiped out nearly $4t
- Greece’s latest cycle of talks with its creditors started with a quarrel, as officials argued over what upfront commitments the government has yet to implement in order to tap emergency loans next month
- U.K. GDP increased 0.7% in 2Q, in line with median forecast; growth in services accelerated while manufacturing declined and construction was unchanged
- Sovereign 10Y bond yields higher. Asian stocks extend yesterday’s losses; European stocks, U.S.equity- index futures rise. Crude oil lower, copper and gold gain
US Event Calendar
- 9:00am: S&P/CaseShiller 20 City m/m SA, May, est. 0.3% (prior 0.3%)
- S&P/CS 20 City y/y, May, est. 5.6% (prior 4.91%)
- S&P/CS 20 City NSA, May, est. 180.34 (prior 177.01)
- S&P/CS U.S. HPI m/m, May, est. 0.10% (prior -0.02%)
- S&P/CS U.S. HPI y/y, May, est. 4.5% (prior 4.23%)
- S&P/CS U.S. HPI NSA, May (prior 170.01)
- 9:45am: Markit U.S. Composite PMI, July P (prior 54.6)
- Markit U.S. Services PMI, July P, est. 55 (prior 54.8)
- 10:00am: Consumer Confidence Index, July, est. 100 (prior 101.4)
- 10:00am: Richmond Fed Manf. Index, July, est. 7 (prior 6)
- TBA: FOMC opens two-day meeting
DB's Jim Reid completes the overnight wrap
When we went to press yesterday Chinese equities were down about 1.5% broadly in line with the rest of the region. A couple of hours later at the close the Shanghai Comp was down -8.5% - the 2nd worst day in history. These violent late day movements are something we've highlighted a few times in recent weeks so by the time you're reading this the China's words below could be completely out of date. In total over 60% of the Shanghai and Shenzhen were limit-down at the -10% floor which means the end result could have been even worse. There was no obvious explanation for the timing or magnitude of the slump. It ceased to be a free market a long time ago so analysing it is tough. Does the slump really reflect concerns over weaker economic growth when the dramatic bubble ascent occurred at a time of sharply weaker growth in the first half? It all seems pretty random to me.
Confusion around support from the China Securities Finance Corporation (CSFC) was a talking point yesterday. According to Reuters early chatter in markets suggested that the CSFC had returned ahead of schedule some of the loans it had taken to stabilise the market while other commentaries at the same time highlighted the suspicious absence of any support from the Corporation. Following the market close however the China Securities Regulatory Commission (CSRC) put out a statement denying any such retreat from the CSFC and instead reinforced that the Commission will ‘continue efforts to stabilise market and investor sentiment and prevent systematic risk’. Interestingly yesterday’s selloff comes after the IMF on Friday urged China to eventually unwind its support to the equity market and allow prices to settle through market forces.
This morning we've seen more huge swings in the Chinese equity markets. Having initially plunged some 5% lower at the open, the Shanghai Comp briefly moved about a percent into positive territory only to then decline once again into the midday break to -1.00%. There’s been similar volatile moves for the CSI 300 (-0.21%), Shenzhen (-1.30%) and ChiNext (-2.18%) this morning while the PBoC has announced that it will inject 50bn yuan into money markets, its largest liquidity boost since early July. The volatility this morning has seen a large range of price action across the rest of Asia. In Japan the Nikkei (-0.04%) and Topix (-0.34%) have both declined slightly along with the ASX (-0.21%) in Australia while in Hong Kong the Hang Seng (+1.52%) has completely reversed a weak start to trade firmer. Elsewhere, in Korea the Kospi (-0.03%) is more or less unchanged. Credit markets have reflected the choppy trading this morning with Asia CDS currently unchanged while Japan is 2bps tighter and Australia half a basis point wider. Oil markets have weakened with WTI -0.5% while Treasury yields have moved 2.7bps higher.
China aside, the wider theme in markets at present continues to be the commodities slump and yesterday we saw another decent leg lower for Oil markets in particular with Brent (-2.11%) now joining WTI (-0.68%) in re-entering a bear market having slumped to $53.47/bbl. It has now lost 20% from the June 10th high of $67.00, declining to a four-month low in the process. The turbulence in China certainly isn't helping matters while export data showing Southern Iraq output rising to an all-time high added to the weakness. Meanwhile Gold (-0.47%) did its best to wipe out the bulk of Friday’s gains while Silver (-0.78%) and Platinum (-0.53%) also moved lower. Copper (-1.43%) added to the broad-based weakness, extending its record lows while Aluminum (-0.21%) also declined. All-told that’s seen the Bloomberg commodity index fall further, declining 1.22% overnight for its fourth consecutive down day and 10th in the last 11 sessions and in turn extending its 13-year lows.
The equity selloff stemming from China helped support a decent drop across most global equity markets yesterday. In Europe we saw the Stoxx 600 fall 2.21% while the DAX (-2.56%), CAC (-2.57%), IBEX (-1.45%) and FTSE MIB (-2.97%) also fell. In the US the S&P 500 (-0.58%) completed five-days of declines now for the first time since January (down 2.9% in that time) with nine out of ten sectors closing in negative territory, led unsurprisingly by energy (-3.31%) and materials (-3.29%). The Dow (-0.73%) and NASDAQ (-0.96%) also suffered similar falls. There was little help from the bottom-up earnings releases after a reasonably quiet day. The latest count on our earnings monitor shows EPS beats at 76% (a modest rise from Friday at 75%) while sales beats have ticked down again to 51% now (from 53% on Friday).
Credit markets also suffered with the weakness in risk assets. CDX IG moved +1.5bps wider while in Europe Main and Crossover were +2bps and +9bps wider respectively. Treasury yields on the other hand continue to march lower with the benchmark 10y yield ending 4.5bps lower at 2.218% and just a couple of basis points off the MTD lows while 30y yields (-2.9bps) fell to a near two-month low at 2.933%. That came despite an OK day for data. Durable goods orders for June rose 3.4% mom (vs. +3.2% expected) while the ex transportation print also increased above consensus during the month (+0.8% mom vs. +0.5% expected) although we did see downward revisions to prior months. Core capex orders rose +0.9% mom during June and also above expectations of +0.5% for just the second monthly increase this year, although shipments edged down during the month (-0.1% mom vs. +0.6% expected). Finally there was a 2.4pt improvement in the Dallas Fed manufacturing activity print for July but to a still weak -4.6 (vs. -3.5 expected), the eight consecutive sub-zero reading.
There was reason for optimism out of the European data flow yesterday following a better German IFO survey reading. The 108.0 reading (vs. 107.2 expected) was up 0.5pts from an upwardly revised June print, signaling an easing of concerns around Greece, while both the current assessment (113.9 vs. 112.9 expected) and expectations (102.4 vs. 101.8 expected) surveys also came in above market. That helped support a strong day for the Euro which finished +0.95% against the Dollar while 10y Bunds finished unchanged at 0.691% after a choppy session. Elsewhere, in its annual report published yesterday the IMF warned that developments in Greece still remain a risk and that authorities shouldn’t become too complacent. The fund did however ‘urge policymakers to use all the available instruments, if needed, to manage contagion risks’ while strongly supporting the ECB’s current plans to keep QE running through September 2016.
Taking a look at today’s calendar now, this morning’s dataflow is centered on the UK where we get the Q2 GDP reading while over in Italy consumer and business confidence readings are expected. Over in the US this afternoon the two-day FOMC meeting begins today while data wise we get the flash composite and services PMI’s for July, S&P/Case Shiller house price index, consumer confidence and finally the Richmond Fed manufacturing activity reading. It’s a busier day for earnings with 40 S&P 500 companies due to report including Gilead Sciences, Ford and Pfizer.
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Strange how there are never any investigations into market rises!
Nothing to pay but the consequences bitches!!
So....
The Fed and PBOC are now in cahoots?
Also the BOJ supporting the PBOC?? Aren't these two countries supposed to be on the cusp of WWIII??
It stinks.
If we accept that equities are not ALLOWED to crash then what does that mean for society?
Is there anything we can do to stop our plutocratic overlords? I don't think there is.
When was the last time a big name went bankrupt? You just don't see it any more.
It seems to me the stock market will be propped up forever, using money stolen from the worlds savings accounts. AND THERE'S NOTHING YOU CAN DO ABOUT IT.
Like anyone has to do anything about it.
The shit that is coming just happens.
WRONG!
Futures WERE "soaring" but that's all over now that ZH jinxed it.
It would be nice to have some strength to sell into...
China's collapse is Canada's carnage...
http://www.planbeconomics.com/2015/07/is-canadian-economy-onthe-edge-of....
soaring is < .05%, ok
soaring is 5-10% liftoff is 100% staight up...
How many Central Planners does it take to control 1.4 billion people?
Futures Soar On Hope Central Planners Are Back In Control
Fool me once....and you can take me a thousand times.
Fool me once, shambers on me, fool me twice, shambers on you.
Down 1.68% in a day with worldwide intervention equals failure.
So does a pain in the neck, but WE don't WANT to talk about that.
How is down 1.68% in a day with intervention a rise?
Instead investigate how central banks can't turn limitless worldwide monopoly money into prosperity.
They don't need to investigate the market rises, the left hand knows what the right hand is doing.
The cabal. Global. Planet wrecking. Demonic entity.
Another day of higher stock prices and lower gold prices in the land of the free - another average day brought to you by the Fed. Why can't the Chinese manipulate markets discreetly like the Fed?
Because the Fed is always wrong, but never in doubt.
Ouch, that hurt!!
You have to come to terms with the fact that gold is sinking due to physical selling in China.
That 4% drop last week? Not paper gold. Not western manipulation. Real physical gold. 33 tons. Sold off in China.
http://www.reuters.com/article/2015/07/20/markets-precious-china-idUSKCN...
actually makes sense. desparation to cover margin...
but, a transfer to strong hands! moar fleecing...
Centrally planned laissez-faire...lol. See my brothers & sisters? This is our vindication. We are not crazy, the world has gone mad ;-)
wow.
Prediction:
There will be no market collapse, not even in China. The Central Banks and Planners around the world, especially Draghi and the ECB, are going to print money like there is no tomorrow.
Money will flood back in all the markets...and we will have a ROARING 2020's to make the 1920's look dull in comparison.
Sometime in the late 2020s we will have the Mother of all Depression for the last 2,000 years....and then everything hellish that can happen, will happen.
Man does not behave rationally, never has, and never will. Irrational greed will drive the thieves of our corrupt governments.
As I stated several times before.... DOW 100,000 here we come! The stage is set.
God help us all...the lunatics are going to drive our economies to financial hell.
Prediction
You will cease to exist here in a few weeks
Ta ta..
But your few months is sustainable?
They could float it, but it depends on the delusion of the sheeple the world over.
There was delusion in a high end real estate market I visited last weekend.
Trying to convince a relative that now was the time to sell, and they said "Prices aren't going to go down, I'll get more next Summer".
In between dicks, Jim Nabors would say, "SURR-PRISE SURR-PRISE!"
They allowed you to watch '60s reruns in the big house? Much too lenient, and potentially subversive.
Heheh.
real assets continue to devalue. ie commodities. oil, lumber, some of the softs, copper, iron, coal, alum, silver, gold, ect. ect.
eventually this has to reconcile...
world wide recession
The letters d and p are consonants.
You only have to buy vowels.
i can add! spelling is a bitch. how do you spell constanant?
Worldwide DePression.
get it, slow today
So things must be so bad that Japan is helping China ????
The question is whether the western bankers/central planners (and whoever controls them) have control over China, their markets and their money supply.
If they have conquered China (or just a few politicians) will make a difference when they try to make the country bend to their will.
My guess is that Japan balked at being controlled by the evil bankers (and the banker's masters) and so they have been punished and whipped into submission.
It is a screwed up world with really, really bad/evil management. It does not have to be that way. However, since there is a failed population that controls things, they do not know any different than how to make the entire world emulate their failure.
the club, loosely linked by greed and keynsian driven money creation.
control of the masses w/o too much bloodshed (for now)...
edit:template for control, time tested since 1913.
QUICK! Re-inflate that bubble! Look! Mega Maid (Yellen) has gone from "suck" to "blow!" (Courtesy of Spaceballs)
https://www.youtube.com/watch?v=O7aeWQCF1jM
It's on like Yellen's thong.
After 5 days of losing, our markets are due for an oversold rally. We'll have to see if Janet squashes it tomorrow.
This Mahkit needs to drop 10,000 points before it will be oversold. But keeps looking at charts and historical trends. The Native Americans believed they could make it rain with a dance. So go on believing there is a functioning "market" if it makes you feel better about your empty existence.
Ghost Dance Yellen.
The Fed can bring back the good times.
S&P 666 is true valuation.
Great, when does my check for $4 Million tax-free arrive in my account Mr. Yellen?
It's a joke on the entire world that China (or any other country with a stock exchange) can call their exchanges a market. There is no real price discovery. You can't truly quantify risk. It's a gigantic charade with the central banks pumping in huge quantities of cash to hold up prices. In the real world you can be arrested for this type of manipulation, but when it's done by bankers "for the greater good" the rules are changed. In my time on a trading desk, which is substantial, I have NEVER seen a time where financial engineering performed by a goverment was not eventually completely undone. Be prepared for the worst.
"...And then, just around 10pm Eastern, we saw a coordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members,..."
Source please? Or is this just speculation, innuendo, rumour, and tweets that masquerade as fact?
Yeah,it was a bunch of farmers who coordinated their last stitch margin balance purchase.
"China is playing the long game" is what my friend in Beijing would say. So which I say: "one would hope so, since the short game is not going very well."
This shit is disgusting to watch. It is a circus not investing! Only game that stays down is Gold and silver because this group of courrpt bankers want it there.
'futures soar"...eat a bowl of dicks....+7 on the spooz - and that is soaring?