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Violent Government Buying Spree Sends Chinese Stocks Soaring At Close Of Trading; Yellen On Deck
China is slowly learning.
On a day when market participants will care about only one thing - how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) - Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese "plunge-protection" mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet, something which the Fed and Citadel have shown is the most efficient way of "setting" market expectations and getting the most bang for your manipulating buck.
BREAKING: Shanghai benchmark index ended 3.44% up as gov-backed funds rushed to buy stocks in last 30 mins of trading pic.twitter.com/urppX8GUvI
— George Chen (@george_chen) July 29, 2015
As a reminder, "banging the close" is illegal if it sends the price lower. When it pushes prices higher, it is perfectly accetable.
What was the reason for this latest blatant intervention when according to SCMP's George Chen, about 400 stocks hit 10% daily limit today, "mostly in last 30 mins of trading." Alas nobody knows such answers in centrally planned markets: "No clear reason to explain why the magical bullish last 30mins trading happened; Rumors say Gov is keen to push index back above 4000 points." Chen further adds that "many local analysts now believe 3600 points is so-called "policy bottom". Below that Gov feels like losing face. Next target is 4000 points."
In other words, after 2 epic crashes in just one month, China is hoping the retail traders will forgive and forget how they lost everything (and more), and just keep putting their hard earned money into a rigged casino. China just may get it.
Other Asian markets traded mostly higher taking the impetus from a positive Wall Street close , as participants focused on upbeat corporate earnings. ASX 200 (+0.9%) outperformed amid gains in miners, following a rebound in commodities. The Hang Seng and Shanghai Comp traded between gains and losses as officials stepped up measures to calm markets, after Chinese press suggested that the government injected USD 100bn in its sovereign fund in order to buy assets abroad. Elsewhere, Nikkei 225 (-0.2%) was the sessions laggard underpinned by index heavyweight Fanuc (-11%) after the Co. lowered its FY profit guidance by 1 7%.
Stocks in Europe failed to hold onto best levels of the session and heading into the North American open are seen mixed, as market participants positioned for the upcoming FOMC release. Gains were led by the health care sector, following earnings by Bayer (+3.9%), with telecommunications sector also performing well following earnings by the likes of KPN (+3.6%) and Telefonica Deutschland (+2.9%).
In spite of the looming risk events, the absence of tier-1 data releases in Europe this morning translated into a somewhat muted price action by fixed income products, while peripheral bond yield spreads tightened, albeit marginally.
Heading into the North American open, EUR/USD and GBP/USD trades marginally higher, with the USD index little changed as market participants sit on the side-lines ahead of the key risk events. In terms of price action overnight, NZD was the session's biggest mover after RBNZ Governor Wheeler reiterated that further easing is likely and additional NZD depreciation is necessary. However, NZD/USD found support after Wheeler stated that the economy is not weak enough to warrant large cuts in the OCR.
The release of the latest API oil inventories yesterday (-1.9mln vs. Prey. +2.3nnln) failed to boost WTI prices, as expectations for the DOE data due out later today still remain for a build in crude, cushing OK, gasoline and distillate inventories. ING has decreased it Q3 brent crude forecast by USD 10 to USD 60 per bbl from USD 70 per bbl citing oversupply, Co. also cuts its Q4 forecast by USD 5 from USD 80 per bbl to USD 70 per bbl. (BBG/RTRS) Turkish energy minister says the Iraq-Turkey oil pipeline which was closed because of an attack is due to be reopened on Sunday. (RTRS)
Today in the US the key report is pending home sales data from the always entertaining NAR, before the FOMC statement this afternoon. On the earnings front Facebook, Goodyear and Metlife are the notable reporters.
In summary: European shares remain higher with the telco and personal & household sectors outperforming and autos, construction underperforming. Companies including LafargeHolcim, HeidelbergCement, Bayer, Peugeot, KPN, Barclays, BATS, Volkswagen, Total release sales/earnings statements. Brent crude falls for 6th day. Russia ends foreign currency purchases in move which may lay groundwork for 5th interest-rate cut this year on Friday. The Swiss and U.K. markets are the best-performing larger bourses, Italian the worst. The euro is little changed against the dollar. German 10yr bond yields rise; Greek yields increase. Commodities decline, with nickel, corn underperforming and natural gas outperforming. U.S. mortgage applications, FOMC rate decision, pending home sales due later.
Market Wrap
- S&P 500 futures up 0.2% to 2091.3
- Stoxx 600 up 0.4% to 391.6
- US 10Yr yield up 2bps to 2.27%
- German 10Yr yield up 3bps to 0.72%
- MSCI Asia Pacific up 0.5% to 140.9
- Gold spot up 0.1% to $1096.4/oz
- 13 out of 19 Stoxx 600 sectors rise; telco, personal & household outperform, autos, construction underperform
- Eurostoxx 50 +0.1%, FTSE 100 +0.4%, CAC 40 +0.3%, DAX +0.1%, IBEX -0.2%, FTSEMIB -0.9%, SMI +0.8%
- Asian stocks rise with the Shanghai Composite outperforming and the Nikkei underperforming; MSCI Asia Pacific up 0.5% to 140.9
- Nikkei 225 down 0.1%, Hang Seng up 0.5%, Kospi down 0.1%, Shanghai Composite up 3.4%, ASX up 0.7%, Sensex up 0.4%
- 9 out of 10 sectors rise with telcos, staples outperforming and industrials, tech underperforming
- Solvay Agrees to Buy Composite Maker Cytec for $5.5 Billion
- HeidelbergCement Plans to Purchase Italcementi for $4.1 Billion
- Billionaire Ambani Said to Weigh Sale of U.S. Shale Gas Holdings
- Euro up 0.03% to $1.1063
- Dollar Index down 0.16% to 96.62
- Italian 10Yr yield up 1bps to 1.88%
- Spanish 10Yr yield up 3bps to 1.94%
- French 10Yr yield up 3bps to 1.01%
- S&P GSCI Index down 0.3% to 382.4
- Brent Futures down 0.3% to $53.1/bbl, WTI Futures down 0.4% to $47.8/bbl
- LME 3m Copper up 0.3% to $5315/MT
- LME 3m Nickel down 1.2% to $11185/MT
- Wheat futures down 0.7% to 507 USd/bu
Bulletin Headline Summary from RanSquawk and Bloomberg
- Stocks in Europe failed to hold onto best levels of the session and heading into the North American open are seen mixed, as market participants positioned for the upcoming FOMC release.
- Apart from the FOMC release, the focus will also be on the release of the latest US pending home sales report and the weekly DOE data release.
- In terms of earnings, Facebook, MasterCard and Altria are only some of the large-cap stocks due to report later today
- Treasuries decline before FOMC decision as Chinese stocks rise for first time in four days and week’s auctions continue with $35b 5Y notes; WI 1.620% vs 1.710% in June.
- Economists remain somewhat divided over when Fed will begin to hike rates after this week’s FOMC mtg in Washington, though most see Sept. liftoff, based on published research; Fed decision day guide
- Shanghai Composite rebounded in last hour of trading to halt a three-day, 11% slide amid signs of waning interest by retail investors and margin traders; turnover was the weakest in almost in two months
- China’s actions in the past month adds a new conundrum for central bankers after the dependence of it stock market on official support was exposed Monday with the biggest drop since 2007 amid speculation aid had been dialed back
- The U.S. Senate Permanent Subcommittee on Investigations, which has used its power for more than a decade to scrutinize corporations and financial institutions for wrongdoing, is shifting its focus to keeping tabs on the government
- Top officials from 12 Asia-Pacific nations formally kicked off a four-day bid to hammer out a massive but so far elusive free-trade agreement that has been in the works for 6 years
- U.K. mortgage approvals climbed to 66,582, more than expected. from an upwardly revised 64,826 in May, the Bank of England said in London on Wednesday
- Sovereign 10Y bond yields higher. Asian stocks gain; European stocks, U.S.equity- index futures rise. Crude oil lower, copper and gold gain
US Event Calendar
- 7:00am: MBA Mortgage Applications, July 24 (prior 0.1%)
- 10:00am: Pending Home Sales m/m, June, est. 0.9% (prior 0.9%); Pending Home Sales NSA y/y, June, est. 11.1% (prior 8.3%)
- 1:00pm: U.S. to sell $35b 5Y notes
- 2:00pm: FOMC rate decision
DB's Jim Reid completes the overnight recap
As DB's Peter Hooper has suggested, the FOMC statement (no press conference) is likely to give themselves maximum flexibility to react to data in the weeks ahead, including two employment reports, the employment cost index, and a host of data on consumer and business spending, as well as inflation-related developments. The Q2 GDP numbers and historical revisions (tomorrow) will be of interest for what they show about PCE inflation as well as spending and output. Having said all this it will surely be odd if they don't acknowledge the recent fall in commodities. As DB's Joe LaVorgna points out the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% (all other things being equal) over the next couple of months, which would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history. However core YoY CPI inflation is likely to edge above 2% in the months ahead which complicates matters. So the Fed have plenty to think about but today they'll likely defer the decision.
Onto the hot topic at the moment - namely China. Bourses have fluctuated into the midday break, albeit with less volatility than we’ve seen of late. Having opened about 1.5% firmer, the Shanghai Comp has since crossed between positive and negative territory nine times and as we go to print is slightly down at -0.21%. The CSI 300 and Shenzhen are -0.36% and -0.56% despite the July consumer sentiment reading bouncing 2.2pts during the month to 114.5, the highest level since March.
Yesterday our economics team in China highlighted the recent surge in pork prices for the country in recent weeks. They noted that having stayed negative for 14 consecutive months since the beginning of 2014 (averaging -4.2% in the time), the yoy growth of pork prices turned positive in March (+2%) and averaged nearly 7% in Q2 (8.3% in April, 5.3% in May and 7.0% in June). Pork prices have typically been the driving force for CPI in past cycles and they expect prices to remain on the rise for the next 6 to 12 months, reinforcing their view that CPI will be on an upward trend in H2. Our colleagues also point that in the past 15 years, the PBoC has never cut interest rates when inflation was picking up (whether driven by food or more broad-based) and so believe that this could constrain the room for further easing beyond one cut (and one further RRR cut) in Q3 this year. They then expect the policy stance to turn from loosening to neutral in Q4 as inflation rises and growth picks up slightly.
Another member of the BRIC group, Brazil, is also generating plenty of noise at the moment after the news that S&P has revised the outlook of Brazil’s BBB- sovereign rating to negative from stable and in turn moving them one step closer to losing their investment grade status. The rating agency cited the ongoing corruption investigations which are ‘increasingly weighing on Brazil’s fiscal and economic outlook’. The move will likely lead to greater focus on today’s rate decision for the COPOM with the market expecting the Selic rate to be raised 50bps to 14.25%.
Glancing over the rest of markets this morning outside of China, it’s a mixed picture across most of Asia with the Nikkei (-0.05%) ande Hang Seng (+0.05%) more or less unchanged but the Kospi (+0.43%) and ASX (+1.03%) firmer. Commodity markets are fairly muted with Gold +0.16% but WTI (-0.27%) and Brent (-0.32%) both lower. S&P 500 futures are unchanged while credit indices in Asia, Japan and Australia are around a basis point tighter.
Back to the price action yesterday, risk assets finally got a much needed rebound as a decent day for corporate earnings, coupled with an intra-day recovery in Chinese equity markets (albeit still finishing down) and a calmer day in the commodity complex which seemingly all contributed to a positive day across equity and credit markets. In the US we saw the S&P 500 rise steadily over the session before eventually closing +1.24%, aided by energy (+2.99%) and materials (+2.15%) stocks in particular and snapping a five-day losing streak in the process. Before this in Europe a strong opening helped the Stoxx 600 (+1.07%), DAX (+1.06%) and CAC (+1.01%) also close higher. Credit markets received a boost too with Crossover closing 5bps tighter and CDX IG finished nearly 2.5bps tighter in the US. It was a much calmer day in the commodity complex meanwhile. Gold (+0.14%) led a modest recovery for precious metals, helping lift Silver (+0.88%) and Platinum (+0.22%) while Copper (+2.11%) bounced off Monday’s 6-year low to record its first up day since July 16th. WTI (+1.24%) rose off the recent lows to close just shy of $48/bbl (at $47.98) although Brent (-0.32%) pared some earlier strength into the close to extend the latest bear-market run. The Bloomberg commodity index yesterday recorded a 0.81% gain, halting a four-day slide.
Earnings certainly helped support the better tone yesterday. Ford, Pfizer, Merck and UPS were some of the headliners to report earnings beats with share prices rising between 1% and 5%, while an after the close report from Gilead Sciences also saw shares surge in aftermarket trading. Interestingly, despite growth in North American and Europe, Ford’s CFO highlighted the difficulty in China, trimming its full-year forecasts for sales in the country. With the latest round of reports taking the number of S&P 500 reporters now to 236, earnings beats have remained steady at 76% while the beat/miss ratio at the sales level is now evenly matched at 50/50 (beats having stood at 51% yesterday). Over in Europe meanwhile, with 131 Stoxx 600 companies having reported both earnings and sales beats have remained relatively steady at 65% each.
Data flow in the US yesterday was highlighted by a notably weaker than expected Conference Board consumer confidence print (90.9 vs. 100.0) for July. The reading declined 8.9pts from a downwardly revised June print, the biggest decline in four years and in turn taking the reading down to the lowest level since September last year. The details were just as weak with a gauge of consumer expectations for the next six months falling 12.9pts to 79.9 in the month and measures of jobs and business conditions outlooks also weakening. Elsewhere, the S&P/Case Shiller house price index for May was also weak having fallen 0.18% mom during the month (vs. +0.30% expected). On the other hand we saw a slight improvement in the flash July services PMI to 55.2 (vs. 55.0 expected), an increase of 0.4pts which helped to lift the composite up 0.6pts to 55.2. There was also some decent improvement in the July Richmond Fed manufacturing activity index which rose 6pts to 13 – a nine month high. All told there was little change in the Treasury market with the benchmark 10y closing 3.2bps higher in yield at 2.251%, barely budging following the data. The Dollar did pare gains however following the data, but still closed +0.28% on the day.
European data flow was centered on the UK yesterday where we saw Q2 GDP print in line with consensus at +0.7% qoq helping to put the annualized rate at +2.6% yoy. DB’s George Buckley believes that this combined with recent data flow suggests the recovery is sustainable but that the major concern in this respect is the reliance on growth from the consumer segment as opposed to other spending components. Sterling caught a bid on the back of the print, closing +0.35% against the Dollar while 10y Gilts finished more or less unchanged at 0.973% (+0.2bps). It was a quiet day all round for European sovereign bonds in fact with 10y Bunds a very modest 0.2bps lower in yield at 0.688% and the peripherals around 2bps lower.
Before we move onto today’s calendar, one thing to keep an eye on is the potential re-opening of the Greece equity market soon. Yesterday we heard the ECB approve proposals for trading rules to end the now four-week closure according to the Athens Stock Exchange. Any timing and trade restrictions are to be decided by a finance ministry decree. In the time that the exchange has been closed, according to Bloomberg a US listed ETF which has served as a proxy for the exchange is down 18%.
Turning over to the day ahead now, German and French consumer confidence readings along with UK consumer credit and mortgage approvals data are the key releases this morning. This afternoon we get June pending home sales data in the US before the FOMC statement this evening (due 7pm BST). On the earnings front Facebook, Goodyear and Metlife are the notable reporters.
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how long can this go on..the can cant be kicked forever... jfc..
Screw it.....I wanna go bat shit crazy.....you can't stop me.
Assimilate me into the CNBC matrix.
Immediate 25 bps hike announced today
Massive, horrid, epic, titanic crushing panic selling follows...
No rate hike today.
Welcome to the new normal.
If Janet raises rates today she better destroy her cellphone immediately afterward.
her cellphone might go to the Smithonian Institute. Right next to Hank Paulson's, of course
but 80% of "economists" believe it's due in September, this rate hike
These be the same eCONomists who were certain of a June hike?
If increasing interest rates from 0.00 to 0.25 kills the "economy" were dead anyway (which is the case, by the way). Try increasing rates to a "normal" 3 to 5 percent range then see what happens.
The MSM was heralding China's rebound this morning. Let's ignore the fact that many stocks in China are frozen from being traded and that it is now illegal in China to "aggressively" sell stocks. Rally on!
Janet has a sign in her office 'Rate hike tomorrow".
Always tomorrow.
Free Beer
http://ecx.images-amazon.com/images/I/61Ojp%2BJZnRL._SX355_.jpg
They can only bang the close so many times before they end up banging their heads.
Banging the close LOWER, is NOT illegal when they do it to PMs.
Hey, this is what the end looks like. Really, a country literally setting a target for their stock exchange is a pretty good sign that this is all done. Just watch as the hand gets played out.
You still can't sell your stocks in China (supossedly). How's that going to end? And when China goes, and it will, it is going to drag a lot down the bowl with it.
View things through the perspective of the eventual outcomes. When China starts to sincerely blame and lash out it will get intense.
Well on their way to devaluing their currency.
from a Chinese perspective of this ongoing currency wars, their currency is expendable
as often, it's a question of price, alternatives and options
China produces, China exports, China has a demand placed for more SDR at the IMF (and is building an alternative), China has the production of one third of all gold
the only thing that China's ruling party can't afford is too much popular discontent. hence the "violent government" buying spree
https://www.youtube.com/watch?v=AiECWKxgD-Y
Mass immagration of unsupervised American children into Venezuela.
No one saw it coming.....and they're not equipped to handle it.
lol that and 800% hyperinflation...
The Venezuela government needs to do......umm.....violent un-hyperinflation.
So anyways, apparently suspending a magnet over the .gov hard drive recycle bin and gallons & gallons of super glue the IRS has miraculously "recovered" more of Lois Lerner's irretrievably lost forever emails:
IRS Program Manager Cindy Thomas of the Cincinnati Exempt Organization office replied to Lerner a few hours later with an email detailing the pressure caused by the IRS’ Washington headquarters failure to move on the “advocacy cases.” Thomas warned of litigation and admitted that she authorized a letter for more information that was sent to one of the complaining groups to keep it from contacting Congress:
http://www.judicialwatch.org/press-room/press-releases/judicial-watch-ir...
These central government interventions in the Chinese stock market are limited, targeted, and temporary. It's simply to help their economy through a stubborn rough patch. I see green shoots already; it won't be long before the central government begins their well-planned exit policy and returns to a benign hands-off approach.
I congratulate China but ask her, "how many buying sprees can she afford?"
It's obvious china needs a Tuesday, and a 3:30
"Furious Government Buying Spree Sends Chinese Stocks Soaring"
So the Chinese mom&pop infestors that were crying the blues yesterday will be cheering today. Gubmint saved them... like they hoped they would.
Time to hock some more shit and buy moar stawks!
Big can, big foot!
so the gov of china will own 51 percent of the publically traded stocks?
no need for board of directors, oh wait yea, need to share some of the wealth with friends and family.
foriegn reserves are now stawks, treasuries, gold and gun pointed at non-compliance; a fucking beaming star of the rising sickle. maybe this is the template for merica...
edit: merica, the corporation controlling the gov with full fed oversight-fascism / the club.
oh, and donald is going to break this up or even challenge it; he is one of them, fucking joke.
so the gov of china will own 51 percent of the publically traded stocks?
Uh-huh...and then they'll just take the other 49 percent.
Then they'll send stock holders a $5 EBT card.....spend it quick.
I challenge the donald to end the challenge.
Donald doesn't do challenges.
MSM <--- but he has too!
No.....he doesn't
Now go ask the other 15 candidates how they feel about that.
Are they Booker T candidates, if so, their vote don't count here.
Do as I command, not as I choose to do when I choose to do it.
In the last 60 minutes of trade? How unsophisticated. I thought this could be done in milliseconds by "real" people.
Can someone explain to the idiotic PBOC that if you were on margin, lost, you've already been cashed out. By cashed out, I should say debt'ed out as you owe the broker monies. Unless people can post their souls as collateral, ain't no retail gonna be buying.
Unless people can post their souls as collateral,
Please FD don't give them any ideas...
The chief economist of Bremer Landesbank, Folker Hellmeyer, calls for the emancipation of Europe from the United States. The US government attempts to the euro zone on the principle of "divide and rule" to destabilize. The figures speak for themselves: The consumption on credit in the US is not sustainable and have the USA brought already on crash course. The much maligned euro zone have a much better economy. Europe should therefore be oriented towards China and Russia.---Deutsche Wirtschafts Nachrichten (Google Translation)
calls for the emancipation of Europe from the United States
Yeah....I'm sure that will help.
18trillion sick plus unfunded liabilities, well in excess of 3x gdp. but not all due now,wew, all good for another day of treasury sales. so when does the train stop chugging? when the rest of the world gets sick and tired of being a pawn to the dollar/control? only the masses can decide this outcome. gotta get much worse before change can happen...
$100B / mos... Better than Janet's $85B/ mos. Janet is a piker.
We must continue subsidizing the peripheral plantations.
/hahahahahahaahaa
"Chinese stocks... despite the latest $100 billion injection"
sheesh Tylers, do you guys even read your own posts, or read the tweet of the dude you are quoting? that $100B funding was for China's sovereign wealth fund to buy OVERSEAS assets, not for the stock market bailout fund.
two totally separate things.
Communist government believes they own everything and all citizens... sort of like 0bama and the DOJ, EPA, DOE, ATF, NSA, IRS, government unions, etc.
You are all just money generating meat-sicles to support the government employees, their pensions and their sycophant leeches.
So we got that going for us.
It's not a sign in her office, it's tattooed on her cheeks.
Eat lead.
.
-Mao Zedong
Since the govt want to keep the stocks high, who is going to tell them (everyone for that matter including people at zh and other blogs and news outlets and people in academics) that the value of equity is always zero.. (oops, negative number) you can only do so much to keep it afloat....
zh, did you get it? Not in the long term ... the equity is always zero... if it is not then you should reassess the whole reason why you have this shop open.
After Tianamen square massacre,both Kissinger and Yassir Arafat called the PRC leaders
to congratulate them for their triumph. What a guy.....