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US Futures Resume Tumble, Commodities Slide As Chinese "Hard-Landing" Fears Take Center Stage
It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."
At danger of pointing out the all too obvious, China Minzu Securities noted that "currency devaluation isn’t substantially helping exporters’ profit margins for now; overseas shipping volumes may increase a bit, but that may not be enough to offset the decrease in asset valuation." Well then, there is always "moar" devaluation, right. "Downward pressure on China’s manufacturing sector will persist for some time given the oversupply of property,” Zhu Qibing, Beijing-based analyst, says in interview. "There might be one more PBOC RRR cut toward the end of the year." That, or the PBOC will cut the CNY by another 10-15% before the year is done.
And then, confirming that the Chinese contagion is not "spreading" but "spread", we got Thailand customs exports data which plunging at -6.7% was double the expected -3.1% drop, as trade patterns across the entire Asia-Pac region, or rather the entire world, are now dramatically disrupted.
All of this has pushed the USDJPY down from its closing price of just around 120.50 on "Biotech Butchery" Friday to just below 120.00, which in turn has slammed US equity futures, and as of this moment:
- S&P FUTURES FALL 15PTS TO SESSION LOW; NASDAQ -36, DOW -120
Ironically China's weakness, while slamming US equity futures, did not have an impact on Chinese stocks where - sure enough - hopes of more easing saved the day: while Asian equity markets tracked the lacklustre close on Wall Street where the NASDAQ Biotech index suffered its worst weekly loss in 7yrs and fell back into bear market territory, the Shanghai Comp. (+0.3%) was initially pressured after Chinese industrial profits (-8.8% vs. Prey. -2.9%) declined by the most on record but then pared losses on hopes of additional stimulus . The Nikkei 225 (-1.0%) was weighed on by a firmer JPY and many firms trading ex-dividend. The ASX 200 (+1.4%) bucked the trend amid gains in large banks and domestic M&A flow. Markets in Hong Kong, South Korea and Taiwan are closed for public holidays. 10yr JGBs traded lower on rebalancing ahead of month and fiscal half-yr end, while the BoJ entered the market to purchase JPY 1.2trl in government debt as expected.
Over in Europe, the biggest mover for once was not Volkswagen or some other emissions-masking German car marker, but well-known to Zero Hedge readers commodities trading floor with an attached mining operation Glencore, which plunged a whopping 27% so far today after an Investec report said what we have said since March 2014 (and what Goldman repeated last Thursday), namely that the company's equity is worthless if commodity prices do not move higher. Hardly news here, but news everywhere else apparently, and as a result GLEN bonds and stock have both plunged to record lows.
Stocks kicked off the week on a negative footing (Euro Stoxx: -1.26%), with the sentiment dampened by less than impressive macroeconomic data from China, as well as reports by Les Echos citing IMF's Lagarde suggesting that the IMF is likely to revise downwards its estimates for global growth. As a result, materials sector continued to underperform, with shares of the troubled mining and trading firm Glencore (-25.0%) continuing to slide to fresh record lows . On the other hand, shares of SABMiller (+3.2%) surged following reports that AB InBev may submit GBP 70b1n bid for the brewer.
Looking elsewhere, despite the looming supply out of Eurozone, where around EUR 18.5bIn is expected to be absorbed this week vs Prey. EUR 8.8b1n, Bunds traded bid, in part supported by the cautious sentiment observed during the opening hours of trade in Europe. At the same time, Spanish bonds outperformed, with SP/GE lOy spread tighter by 5bps after the weekend's Catalan elections showed that despite gaining the majority of seats, the pro-independence Junts pel Si failed to gain a majority of the votes. Of note Gilts look set to strengthen from substantial month end extensions, worth 0.23yrs according to Barclays Sterling Aggregate Index.
In FX, dampened sentiment has bolstered the likes of both JPY and EUR today, with both currencies gaining against the USD as USD/JPY continues to eye 120.00 to the downside . Elsewhere, GBP outperformed its major peers on the back of the aforementioned M&A related flows from the SABmiller news.
The metals complex continues to edge lower in European trade with precious and base metals both trading lower on the back of negative outlook in China. WTI and Brent also trade in negative territory heading into the NYMEX pit open, with China concerns remaining in focus.
Going forward, today's highlights include the release of the latest US personal income, PCE deflator and pending home sales reports, as well as comments by Fed's Evans, Dudley and Williams.
Finally, unrelated to the macro newsflow, but what will surely be watched closely, is a tweet from Carl Icahn that tonight at midnight, the billionaire is releasing a video called Danger Ahead which "covers several critical matters I believe we need to be far more aware of."
I’m releasing a new video at midnight called “Danger Ahead.” It covers several critical matters I believe we need to be far more aware of.
— Carl Icahn (@Carl_C_Icahn) September 28, 2015
Bulletin Headline Summary from RanSquawk and Bloomberg
- Equities start the week in the red with weak Chinese data and downbeat IMF comments weighing on sentiment
- Dampened sentiment has bolstered the likes of both JPY and EUR today, while GBP outperformed its major peers on the back of M&A related flows
- Going forward, today's highlights include the release of the latest US personal income, PCE deflator and pending home sales reports, as well as comments by Fed's Evans , Dudley and Williams
- Treasuries gain as commodity producers lead stocks lower, with Glencore Plc tumbling to a record low in London and profits at Chinese industrial companies plunging in August.
- Chinese industrial profits plunged 8.8% last month, with the biggest drops in coal, oil and metals producers, as the pillars of China’s infrastructure-led growth model suffered from a devalued yuan, tumbling stocks and weak demand
- Glencore Plc slid as much as 25.5%, biggest intraday decline on record, as Investec plc warned that there was little value for shareholders should low commodity prices persist
- Driven by a retreat since mid-August, the S&P 500 has seen its average price over 12 months fall for two straight months, a pattern that accompanied the start of the last two bear markets, data compiled by Bloomberg and MKM Partners LLC show
- Saudi Arabia has withdrawn as much as $70b from global asset managers as OPEC’s largest oil producer seeks to plug its budget deficit after crude slumped, according to financial services market intelligence company Insight Discovery
- In Spain, Catalan president Artur Mas won 48% support in Sunday’s vote; voters in the region narrowly rejected his plan to build an independent state
- Royal Dutch Shell Plc will halt exploration in the U.S. Arctic after $7 billion of spending ended with a well off Alaska that failed to find any meaningful quantities of oil or natural gas
- Sovereign 10Y bond yields decline. Asian stocks mixed; European stocks and U.S. equity-index futures lower. Crude oil, copper and gold lower
US Event Calendar
- 8:30am: Personal Income, Aug., est. 0.4% (prior 0.4%)
- Personal Spending, Aug., est. 0.3% (prior 0.3%)
- Real Personal Spending, Aug., est. 0.4% (prior 0.2%)
- PCE Deflator m/m, Aug., est 0% (prior 0.1%)
- PCE Deflator y/y, Aug., est. 0.3% (prior 0.3%)
- PCE Core m/m, Aug., est. 0.1% (prior 0.1%)
- PCE Core y/y, Aug., est. 1.3% (prior 1.2%
- 10:00am: Pending Home Sales m/m, Aug., est. 0.4% (prior 0.5%)
- Pending Home Sales NSA y/y, Aug., est. 8.0% (prior 7.2%)
- 10:30am: Dallas Fed Mfg Activity, Sept., est. -10 (prior -15.8)
Central Bank Speakers
- 8:30am: Fed’s Dudley speaks in New York
- 1:30pm: Fed’s Evans speaks in Milwaukee
- 5:00pm: Fed’s Williams speaks at UCLA Anderson School of Management
DB completes the overnight event summary:
A turbulent and choppy week for financial markets finally comes to an end and one which it’s hard to imagine gave much confidence to the Fed that the volatility and nervousness that had plagued markets in the run-up to the FOMC meeting, has abated at all. A combination of factors played their part last week. Mixed signals from Fed speakers was a theme, as were continued concerns around China and emerging markets. Meanwhile, the VW emissions scandal rocked the car-maker industry, while there were concerning forecasts for global demand from Caterpillar and fragility in the biotech industry. A more upbeat report from Nike on Friday confused matters somewhat while economic data continues to be relatively mixed on the whole. Friday saw a late sell-off in health-care names which resulted in the S&P 500 (-0.05%) nudging into negative territory and falling for the fifth time in the last six sessions. In the period from the highs prior to the Yellen press conference shortly following the FOMC decision to Friday’s close, the index has in fact fallen 4.5%. It’s been much the same for US credit too where CDX IG has widened nearly 10bps with primary market latching onto any window of stability to get deals away. Interestingly rates markets have been more stable. US 10y Treasury yields have fallen ‘only’ 13bps with the bulk of that move coming in the very short period of time immediately following the FOMC decision, with yields somewhat range bound ever since. December liftoff expectations have certainly been heavy hit however and we finished Friday pricing a 43% chance of a hike, well down from the 64% we got 12 days ago.
So as we look ahead there’s a lot to look forward to this week with economic data capped by the September payrolls reading this Friday. Market consensus is currently running at 202k which is more or less in with the forecast of DB’s Joe Lavorgna at 200k. Fedspeak will be closely watched again and it’s set to be a busy one with Dudley, Williams and Evans speaking today, Yellen and Dudley again on Wednesday, Brainard and Williams on Thursday and finally Fischer on Friday post payrolls. If that wasn’t enough, then US politics may play a factor with the end of September marking the date of the end of the fiscal year for the US government with a new budget needing to be passed. That’ll bring the terms ‘debt ceiling’ and ‘government shutdown’ back to the forefront with the latter a possibility (although House Speaker Boehner’s resignation on Friday seen by many as perhaps reducing it). So plenty to look forward to and the usual run down is at the end of the report, but firstly it’s straight to the latest in Asia this morning.
Refreshing our screens, it’s been a fairly mixed start to trading across Asia this morning. Losses are being led out of Japan where the Nikkei (-1.14%) and Topix (-0.67%) have fallen steeply. Over in China and at the midday break, it’s been another volatile start but bourses there are more or less flat at the midday break with the Shanghai Comp currently -0.19% and CSI 300 unchanged. That’s come after some steeper losses following some disappointing industrial profits data out of China. The August print of -8.8% yoy is down from -2.9% in July and is the biggest drop since records began in October 2011. Elsewhere this morning, gains are being led by the ASX which is currently up +1.17%. US equity futures are pointing towards a weak sluggish start, down just shy of half a percent while Oil is down nearly a percent.
Also in focus over the weekend was the Catalonia election where pro-independence parties Junts pel Si and CUP have won the majority of seats in parliament, but have fallen short of the required number of votes for majority. Junts pel Si has won just shy of 40% of votes along with 62 seats while CUP won 10 seats and around 8% of votes. That means pro independence parties have won 72 of the 135 seats in parliament, but just fallen short of the majority percentage of votes with 48%. With the result counted for, DB’s Marco Stringa continues to believe that Junts pel Si will carry on with its pledge to declare unilaterally the independence of Catalonia in about 18 months unless the central government brings a binding referendum on independence. Nevertheless, it’s set to be a demanding scenario from both a legal and political perspective, with perhaps a compromise centered on an overhaul of regional financing sometime in 2016 the most reasonable scenario.
Elsewhere, the weekend press has also been dominated by more stories out of VW. Late on Friday the saga took another negative turn as news broke that the ECB had decided to suspend its buying of ABS backed by VW car loans, raising fears that the company may now struggle to borrow to fund sale and lease deals on new cars. Before the ECB announcement, DB’s Elen Callahan did argue that the company’s recent troubles should not have a huge effect on ABS investors, “given that the vehicles are still ‘safe and legal to drive’ and that the repairs will come at no cost to the owner, we do not expect borrowers to become disincentivized from making their contractual monthly payment on their VW vehicle.” So whilst the exit of the ECB from purchasing the debt is a negative it does not necessarily imply sharply higher default risk. Nevertheless in a large, prominent IG name many previously saw as safe, the exit of a high profile buyer for its debt (in the form of the ECB) at a time of great uncertainty for the company will likely have a magnified effect.
Recapping markets on Friday. Equity bourses had initially got off to a firmer footing following a decent session in Europe, seemingly buoyed from Fed Chair Yellen’s comments late Thursday. The Stoxx 600 closed up +2.84% while there were strong gains also for the DAX (+2.77%) and CAC (+3.07%). This translated into a strong start for US equities, which, also buoyed by an upward revision to Q2 GDP and some upbeat numbers out of Nike particularly around sales in China saw the S&P 500 rise +1%, only for a decline late in the session for health care names wipe out that initial optimism. The decent leg lower for Biotech names saw the NASDAQ close down -1.01% although the Dow (+0.70%) managed to finish in positive territory. Sovereign bond markets were better behaved for the most part with the benchmark 10y yield closing up +3.6bps to 2.162%, while DM yields in Europe were generally 5-6bps higher. The US Dollar had a firmer day with the Dollar index closing up +0.29%, while Oil markets also closed higher with WTI up nearly 2%.
Turning to the data-flow, it was the third and final reading for US Q2 GDP which attracted most of the attention after the data was revised up two-tenths to 3.9% qoq, helped by decent upward revisions to consumer spending (mostly on services) and structures spending in particular. The third reading for the Core PCE was also nudged up slightly by one-tenth to 1.9% qoq. Elsewhere, there was little surprise in the flash services PMI for September which printed at 55.6 as expected, up half a point from August. Meanwhile, there was a positive read-through from the University of Michigan consumer sentiment print after being revised up at the final reading to 87.2, up 1.5pts from the initial print and ahead of expectations for a rise to 86.5. It was a pretty quiet calendar for data prior to this in Europe. The only notable release out of France where we saw consumer confidence for September nudge up 3pts to 97 (vs. 94 expected). Meanwhile, the Kansas City Fed’s George weighed in with her latest view, saying that ‘I think the conditions are there’ to begin liftoff and that ‘you cannot afford to get into a state of paralysis’ in looking for stronger data.
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And then.....reality set in.
Kneegrownomics takes hold.....
Say what?
sorry, kneegrownomics take wholed, gnomesania?
You've obviously been mislead and took it hook line and sinker, prolly from a 6th grade straight a student. No need to be sorry, Casey is driving the train and you are in good hands.
And you are obviously an Obama sack fondler......
How so? You are confusing me.
Last chance for the Shemitah finale.
I can't believe the IMF is having to revise its growth figures downwards. Has that ever happened before?
Nations wrecked = IMF growth.
Peak nation-wrecking?
Or better stated, wreckonomics.
Nations wrecked = IMF growth
I thought the number 7 would save us......I really did.
Is Christine Lagarde the next Oompa Loompa to fall?
https://www.youtube.com/watch?v=APj2ArUy6v4
7 saves, nine kills, so take the middle road while there is still time to take it.
Silver down??? All the coins for sale (not many) around here have gone up???
If you don't like paying the premiums.....just head over to the Comex......they'll comp your parking and serve you free drinks.
U.S. Takes Step Toward Support for China’s Reserve-Currency Bid
Andrew Mayeda
The Obama administration took a step toward backing China’s bid to have the yuan recognized as a global reserve currency, as the U.S. softened its insistence that the Chinese implement financial reforms to win support.
The International Monetary Fund is reviewing whether the yuan should be included in its Special Drawing Rights, a basket of reserve currencies used by the lender as a unit of account. After U.S. President Barack Obama and Chinese President Xi Jinping met Friday in Washington, the two sides issued a statement saying the U.S. supports the inclusion of the yuan “provided the currency meets the IMF’s existing criteria in its SDR review,” a point Xi highlighted in his press conference with Obama.
The shift in the U.S. position follows the administration’s failed attempt to prevent allies from joining the China-led Asian Infrastructure Investment Bank earlier this year, a strategy that was faulted by former policy makers including ex-Treasury Secretary Henry Paulson.
In June, a joint statement by the two countries said the U.S. “supports China making the reforms that would lead to the inclusion” of the yuan in the basket. Friday’s statement mentions U.S. support for “China’s commitment to implement further financial and capital market reforms.”
The new language clarified to the Chinese that the IMF’s assessment of whether the yuan meets the fund’s SDR criteria will be the determining factor for American support, said an administration official who asked not to be identified.
Winning the IMF’s endorsement would validate efforts by Xi to push through policies aimed at making the world’s second-biggest economy more market-oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year. At least $1 trillion of global reserves will convert to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.
“The train delivering the SDR to President Xi in time for the November 2016 G-20 Summit in Hangzhou remains on schedule,” said David Loevinger, managing director of emerging-markets sovereign research at asset manager TCW Group Inc. in Los Angeles. There’s “plenty of wiggle room” within the IMF criteria to allow China to meet the fund’s requirements, said Loevinger, a former senior coordinator of China affairs at the U.S. Treasury.
The IMF’s executive board will make a decision on the yuan reserve-currency issue as soon as November. Approval requires 70 percent of the fund’s voting shares, and even if the U.S. opposed the move, the nation would need several allies because the U.S. has about 17 percent of votes. Many analysts have been predicting approval.
The U.S. and China also look forward to continuing to discuss methods to facilitate yuan trading and clearing in the U.S., according to the joint statement.
U.S. Treasury Secretary Jacob J. Lew in previous comments this year has put the onus on China to prove the yuan belongs, saying the country needs to further liberalize its currency policy and complete financial reforms before it can get the IMF’s nod.
Friday’s shift brings the U.S. closer to the positions of the U.K. and France. In a speech Tuesday in Shanghai, U.K. Chancellor of the Exchequer George Osborne said he’d like to see the yuan added to the IMF basket as the currency becomes increasingly important in global markets and “meets existing IMF criteria.”
French Finance Minister Michel Sapin said last week in Beijing that France favors including the yuan in the SDR basket, though China still needs to meet the IMF’s technical requirements first, according to Francois Coen, Sapin’s spokesman.
http://www.bloomberg.com/news/articles/2015-09-25/u-s-takes-step-toward-support-for-china-s-reserve-currency-bid
http://inteldinarchronicles.blogspot.com/2015/09/s3a-global-debt-forgiveness-activated.htmlJust what the world needs, better, more believable liars backed by the brutality of the state.
This should all end well.
What we need now is a Calvin Coolidge strategy......but tick freakin tock.
http://object.cato.org/images/pubs/commentary/030304-1.gif
Well the price of Gold and Silver as usual start their weekly Monday slide off at 2AM ..... Do they sit around for 48 hours just waiting to hammer it ??
Normally they stand in line for two days to become the first to do the hammerin, braggin rights you know.
Gold and Silver, the most malleable of metals...
;-D
Hammer Time.
http://birkscartoons.com/wp-content/uploads/2010/08/Hammer-Time.jpg
Argentum down 2.59% @ 7:30
"We saved the world!"...lol.
Burn baby burn.
ZIRP and NIRP (free money) mean this will take a while.
In response to the US deploying new nukes to Germany, the Russians launched another test of its medium range ground launched cruise missle in violation (again) of the INF. Im sure The O-ster will respond with stern concern....
http://freebeacon.com/national-security/russia-again-flight-tests-illega...
it's a nothing market. can't short it, can't go long.
Why not?
Last Friday the SPX formed a Negative Reversal, 1h and 4h chart.
Lower Lows to finish wave 5 down is still in progress.
Www.TripsTrading.com
On China, from the article:
"which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue."
What costs are rising for China's manufacturers? Commodities? Wages? Taxes? Energy?
Pure bullshit.
I HAVE A IDEA!!!
LET'S PRINT MONEY TO FIX IT ALL!!!
I just wet my pants. Brilliant idea!
Lets have the FED shareholders print more money.....and just give it to themselves.
We could call it QE4.
That's what QE1 -3 were.....Funny how the socialist jew media runs poll results saying Americans don't want the socialist jew FED "politicized" by auditing where that $$$ went...
"MONDIS! MONDIS YOUNG MAN! YOU HAVE A FUTURE AT THIS FIRM!"
- Says the top hat from Monopoly ...
The world is in flames .... we give you Obama, Hillary, Biden and Whoopi Goldberg ?
Oh come on man we just got rid of Boehner......these things take time.
I suppose we could move on to Whoopi next.....what does she actually do again?
Pls, give us Donald Trump!
VW = DIESEL IRAE
.
.
.
+1
I'm a sucker for Latin puns.
I have an idea that will fix everything!
https://www.youtube.com/watch?v=iKS-pcyNERQ
I have an idea that will fix everything!
https://www.youtube.com/watch?v=i4JBAdIdBtM
All I know is the next Speaker of the House needs to do this....hold the Nazism.
https://www.youtube.com/watch?v=kQeKskCvJwc
Kids decide between helping the Homeless or Ice Cream
We gave 4 - 6 year olds a dollar and observed how they went about spending it.
https://www.youtube.com/watch?v=rksBNj1CsxA
The problem is no one in Congress is 4 - 6 years old.
Those cats are all about getting the icecream....then theyll make laws to remove the homeless.
Negativity is good for you!
...also in conflict news... Border clashes between Armenia and Azerbaijan are escalating... http://www.aa.com.tr/en/world/armenia-azerbaijan-clash-leaves-10-soldier...
Lets hope the rest of the stocks all look like Glencore so we can make lots more money to use for the revolution or citizenshiip somewhere else.
Trouble in the UK for the Tory China Hard Landing deniers;
SSI Redcar steel plant mothballed, with the loss of 1700 jobs
Wasn't the lunar eclipse last night supposed to save us? Or was that the number seven? I forget.
play the bounce? buy it?
Looks like quite a few "cliffhanger" events are happening in markets around the world...wonder who is going to be able to provide parachutes for all these companies when their time comes to go under the "microscope"?..
Isn't it strange how when you do your own investigations using the web, instead of solely buying into maintsream media crap, you come up with predictions of the future that are actually highly accurate.
Based upon foreign English langauge news sources prior to the 3 trillion dollar fiasco called the invasion of Iraq, I knew that it would end up as it has, it just took much longer than I and others thought it would.
Now, the world's economy is on a path that it took much longer to reach than I and others thought it would. But we knew it must eventually happen.
Gee, maybe more people should actually use their brains and do the same in order to discover for themselves that in most any situation that involves the eventual distribution of their money, they are being lied to or presented with only one side of a story.
From Carl Sagan's "The Demon-Haunted World":
[Jefferson] believed that the habit of scepticism is an essential prerequisite for responsible citizenship. He argued that the cost of education is trivial compared to the cost of ignorance, of leaving the government to the wolves. He taught that the country is safe only when the people rule. Part of the duty of citizenship is not to be intimidated into conformity. I wish that the oath of citizenship taken by recent immigrants, and the pledge that students routinely recite, included something like 'I promise to question everything my leaders tell me'. That would be really to Thomas Jefferson's point. 'I promise to use my critical faculties. I promise to develop my independence of thought. I promise to educate myself so I can make my own judgements.'