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Futures Continue Slide On Latest Chinese Economic Disappointments, Gold Hammered
When China was closed for one week at the end of September, something which helped catalyze the biggest weekly surge in US stocks in years, out of sight meant out of mind, and many (mostly algos) were hoping that China's problems would miraculously just go away. Alas after yesterday's latest trade data disappointment, it was once again China which confirmed that nothing is getting better with its economy in fact quite the contrary, and one quick look at the chart of wholesale, or factory-gate deflation, below shows that China is rapidly collapsing to a level last seen in 2009 because Chinese PPI plunged by 5.9% Y/Y, its 43rd consecutive drop - a swoon which is almost as bad as Caterpillar retail sales data.
Consumer price inflation wasn't much better (aside from food prices which jumped, but as the Fed has repeatedly acknowledged, nobody cares about rising food prices), and at 1.6%, it came below the 1.8% expected, resulting in the first slowdown in 4 months.
The result of this latest Chinese economic rout dragged Asian equity markets traded lower as risk sentiment remained weak following yesterday's release of soft Chinese import figures. Nikkei 225 (-1.9%) underperformed and fell below 18,000 amid broad based losses, while the ASX 200 (-0.1 %) was weighed on by the energy sector as crude prices remained near lows. Shanghai Comp. (-0.9%) pared its lacklustre CPI and PPI inspired losses following gains in material names, after the announcement of domestic output cuts and gains in metal prices. Finally, JGBs trade mildly higher amid weaker risk sentiment in Asia.
Perhaps the biggest consequences of China's inflation data is that the world's second largest economy continues to export deflation at an alarming pace, as was confirmed just an hour ago when Germany sold 5 Year Bunds at a negative rate of -0.03%, down from +0.12% in September, and the lowest since April as negative rates once again return to Germany and are sure to make the ECB and Buba's life a living hell.
The European equity session kicked off with yet another uninspiring performance by equity indices (Euro Stoxx: -0.8%), with stocks heading into the North American session lower across the board as market participants digest more disappointing macroeconomic data from China and also react to less than impressive earnings report by JP Morgan. Also of note, ASML shares (-4.1) fell sharply in early European trade after Europe's largest semiconductor-equipment maker warned of lower demand.
As a result, flight to quality trade supported Bunds since the open, with peripheral bond yield spreads widening and Portuguese bonds underperforming ahead of supply. Looking elsewhere, further flattening has been seen on the short-sterling curve amid a somewhat mixed UK jobs report (ILO Unemployment Rate 3Mths M/M 5.40% vs. Exp. 5.50%, Weekly Earnings ex-Bonus 3M/3M Y/Y 2.80% vs. Exp. 3.00%).
In FX, Cable has been the notable outperformer in FX markets, with participants focusing on the employment aspect of the UK data rather than the wage growth, which revealed the highest employment rate since records began in 1971, with GBP also benefiting from M&A flow on the back of yesterday's SABMiller and AB InBev provisional agreement.
Elsewhere, the USD-index has continued to ebb lower during European hours as EUR was supported by an unwind of carry trades amid the risk-averse tone, USD is also being weighed on by GBP which is paring some of yesterday's losses with GBP/USD breaking out of its tight overnight range. This meant that the preferred risk carry trade, the USDJPY is now below 119.50 and sliding.
And most curiously, until just minutes ago China's deflationary wave also meant that gold was soaring - since it implies even more easing by the PBOC eventually - and then out of nowhere, perhaps the BIS gold selling team finally came back from lunch, gold had a furious slam which sent it lower by $10 in the matter of seconds, a move reminiscent of the now busted spoofs that we caught in the past and which led the CFTC to actually do something for once.
This happened just as the yellow metal was about to breach the 200 DMA at USD 1176.77 after reaching 3 month highs, and take off to the next resistance level. Convenient.
While the energy complex has seen modest weakness to remain near one week lows, with participants looking ahead to the API crude oil inventories aftermarket, with the release delayed by a day as a result of the Columbus Day holiday.
Looking ahead, after yesterday's disappointing earnings results from JPM and INTC, today Q3 season continues with pre market earnings from BlackRock, Bank of America, Delta Air and Wells Fargo as well as aftermarket reports from Netflix and PNC Financial Services. On the economic docket, the main focus will be the September retail sales report. Current expectations are for headline sales to have risen +0.2% mom during the month, while our US team are a touch more optimistic, forecasting a +0.3% mom rise. Ex autos, expectations are for a fall of -0.1% mom. The retail control component is set to be closely watched too given the data is used to estimate goods consumption in the GDP accounts. Away from this, we’ve also got the September PPI print due, followed later by business inventories and the Fed’s Beige Book. Earnings wise it’s the turn of Delta Airlines, Bank of American and Wells Fargo all due to report pre or during market hours.
Bulletin Headline Summary
- GBP has been the notable outperformer in FX markets, after today saw the highest employment rate since records began in 1971
- Asian and European indices see weakness amid continued dampened sentiment as participants digest more disappointing data from China and react to less than impressive earnings report by JP Morgan
- Today's highlights include US retail sales report, PPI, the weekly API crude oil inventories update and earnings by Wells Fargo, Bank of America, Blackrock and Netflix
- Treasuries gain as global stocks and commodities fell after China’s producer prices extended a record set of declines and consumer prices rose less than forecast.
- China’s CPI increased 1.6% in Sept., est. +1.8%, from 2% rise in August; PPI fell 5.9%, extending its streak of negative readings to 43 months, the National Bureau of Statistics said Wednesday
- PBOC’s expansion of a program allowing lenders to use credit assets as collateral when borrowing funds from the central bank isn’t a version of QE, according to the top economist at the PBOC’s research department
- This time it’s the steel industry’s turn in the China debt guessing game, as investors wonder if a potential bond default by Sinosteel Co. is an omen of things to come amid slowing demand
- Central bank and sovereign wealth fund assets will shrink by $1.2t by the end of the year as China and petrostates including Russia and Saudi Arabia dip into their savings amid slower growth and lower crude revenues, according to UBS
- UN investigators are set on Thursday to end their probe into Iran’s nuclear past, taking the next step toward the lifting of oil and financial sanctions imposed on the Islamic Republic
- Russian computer attacks have become more brazen and more destructive as the country grows increasingly at odds with the U.S. and European nations over military goals first in Ukraine and now Syria
- Italian Prime Minister Matteo Renzi said that for much of this year the EU mishandled the biggest influx of refugees since World War II, changing tack in reaction to events rather than adopting a long-term strategy
- $11.75b IG priced yesterday, no high yield. BofAML Corporate Master Index OAS holds at +173, YTD range 180/129. High Yield Master II OAS widens 11bp to +624, YTD range 683/438
- Sovereign 10Y bond yields decline. Asian and European stocks fall, U.S. equity-index futures decline. Crude oil, copper and gold drop
DB's Jim Reid completes the overnight recap
JP Morgan's results after the US bell left investors largely disappointed. Quarterly profits rose less than analyst estimates, while a greater than expected slide in trading revenues saw the bank’s share price fall a percent in extended trading. Also out after-market, Intel reported a drop in quarterly profits, albeit holding in better than consensus estimates along with revenues, although a less than convincing management outlook for the sector saw shares also decline in extended trading. Johnson & Johnson was the other notable company to report yesterday, the numbers making for mixed reading after a beat at the profit line but the top-line missing after being weighed down by the stronger dollar.
The other main story overnight is out of China where, hot on the heels of yesterday’s trade data, the latest inflation numbers are in. CPI dropped back to +1.6% yoy (vs. +1.8% expected) in September, down from +2.0% in August after food price inflation slowed in the month. Meanwhile, deflationary pressures at the factory gate show no signs of abating. PPI printed at -5.9% yoy in September, as expected and unchanged from August, marking the 43rd consecutive negative print as a result.
While the data is likely to spark further PBoC stimulus chatter, Chinese equity markets are trading with little obvious direction following the numbers. The Shanghai Comp (+0.06%) and CSI 300 (+0.07%) are more or less unchanged at the break, that’s having initially plunged following the report, before then rallying nearly 1.5% off the day’s lows, only to then retreat once again into the midday break.
Meanwhile, Singapore is the other headline grabber this morning after the MAS eased for the second time this year, reducing the rate of appreciation in the Singapore Dollar. The move was as expected, although there were hopes that the MAS may be more aggressive in its easing. The Singapore Dollar is up half a percent on the back of it. Elsewhere, most other Asia bourses are lower this morning in trading. The Nikkei (-1.62%) is the notable decliner, while the Hang Seng (-0.56%), Kospi (-0.45%) and ASX (-0.17%) are also down this morning. Credit indices in Asia, Australia and Japan are a couple of basis points wider.
It was a weak session yesterday for risk assets globally, feeding off the concerns emanating from the China trade numbers. European markets continued the generally weak tone from the Asia session, the Stoxx 600 finishing -0.92%. That saw the S&P 500 open down, although a rally of nearly a percent from the initial lows in the late afternoon yesterday saw the index at one stage actually break its pre-FOMC highs, only to the then reverse course with Oil falling (WTI -0.93%), the index eventually finishing -0.68%. The Dow (-0.29%) snapped its seven-day winning streak too while the Vix (+9%) was up for the first time this month.
The Treasury market reopened yesterday with 10y yields down just over 4bps to settle at 2.045%, while the Fed’s Tarullo argued against the Fed hiking this year, joining the chorus of support for a delay that we’ve seen from Evans and Brainard also in recent days. The Fed Governor highlighted that in his own perspective, he needs to see some tangible evidence that would give him reasonable confidence that inflation is returning to target, while also noting that ‘past relationships between inflation and joblessness don’t seem to be operating effectively’. Tarullo also warned that ‘a premature rise might be harder to deal with than waiting a little bit longer’. St Louis Fed President Bullard was also in the press yesterday, reiterating his view that the case for raising rates is ‘clear and compelling’. Bullard did however acknowledge that it would be difficult for the Fed to raise at the October meeting given the limited data since the last meeting.
Meanwhile, EM currencies were heavy hit yesterday also, with falls of at least 1.5% for currencies in Colombia, Australia, Russia, Indonesia, South Africa and Brazil. The latter in particular saw its currency fall more than 3%, while the Bovespa (-4.00%) led equity market losses as political uncertainty in the country was heightened further after impeachment proceedings into President Rousseff were suspended by the Supreme Court.
Yesterday’s sole data release in the US came in the form of the NFIB small business optimism reading for September which rose 0.2pts to 96.1 (vs. 95.5 expected). Some of the focus in the European session was on a notable downturn in the latest German ZEW survey. The October current situations print fell 12.3pts to 55.2 (vs. 64.0 expected), the lowest reading since March, while expectations also fell, down 10.2pts to 1.9 (vs. 6.5) and highlighting the fallout from the recent VW scandal.
Elsewhere, in the UK we got the latest inflation numbers for September. After a -0.1% mom (vs. 0.0% expected) print for the month, the YoY rate dipped back into negative territory at -0.1%, having temporarily dipped into deflationary territory back in April earlier this year. The core stayed unchanged at +1.0% yoy after hopes for a modest one-tenth rise, while PPI output prices (-0.1% mom as expected) and RPI (-0.1% mom vs. +0.1% expected) were also soft last month. BoE policy maker McCafferty attempted to downplay the latest numbers by highlighting the transitory impacts from oil and commodity prices.
Meanwhile, we also heard first comments from new BoE member Vlieghe, who was seemingly in no rush to raise rates and slightly more dovish at the margin. With regards to inflation, Vlieghe told lawmakers that ‘there are risks to either side, but given the current low levels on inflation the risks are probably skewed to the downside’. The BoE official also highlighted disappointment around global growth, saying that ‘it is one of the things that will prevent the UK economy from accelerating meaningfully’.
Onto today’s calendar now. There’s more inflation data for us to digest this morning in Europe, this time with Italy, Spain and France due to report. In the UK we’ve got the latest employment report due out along with weekly earnings data, while this will be shortly followed by the Euro area industrial production print. Over in the US, the main focus will be the aforementioned September retail sales report. Current expectations are for headline sales to have risen +0.2% mom during the month, while our US team are a touch more optimistic, forecasting a +0.3% mom rise. Ex autos, expectations are for a fall of -0.1% mom. The retail control component is set to be closely watched too given the data is used to estimate goods consumption in the GDP accounts. Away from this, we’ve also got the September PPI print due, followed later by business inventories and the Fed’s Beige Book. Earnings wise it’s the turn of Delta Airlines, Bank of American and Wells Fargo all due to report pre or during market hours.
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In confusing times such as this I'm glad we have the Gartman inverse weathervane to guide us.
every other indicator is now defunct.
Throwing darts still works.......well.......50/50 anyway.
If you want to improve your odds ever so slightly....you can subscribe to my WAGTM newsletter.
We only except gold....which means it's on sale today.
This HAS to be criminal. What does CFTC actually DO? The manipu;lation has become SO blatant it is difficult to see how CFTC can ignore it. There is one purpose, and one purpose only, of dumping naked shorts at 3AM on Globex, and that purpose is to push the price down. The best we could hope for by way of an answer as to why this is NOT criminal, would be an admission that The Fed/BIS/ESF are behind the selling but even that would be progress as it would get it out in the open at last?
Wow. Tyler never sleeps!
Is that the best the can do with gold? Lower please...
Wish granted.
3 hour special at Fort Knox.....in person only.....you'll have to hurry.
Bloomberg headline: "Hillary Clinton runs the table in debate". They're as fair and balanced as Fucked News.
Bloomberg headline: "Hillary Clinton runs the table in debate". They're as fair and balanced as Fucked News.
what did it take to produce this $10 drop? An extention to 300 paper oz to the phyzzy?
It took The blood of generations.
Nothing like a fake market to participate in, who in there right mind would be in this market with the ignorance in-charge of it? Its so obvious. Manipulating gold/silver is a no win situation, its a DESPERATE MOVE to make things look "Good". Our leaders simply suck, they paid for their education and it shows, next time they should try earning their education. Fuck this phony B.S.!
How do the people achieve justice in this situation? A fair market to participate in? They simply wont let us, we need justice to prevail. By manipulating they are rewarding the wrong behaviors. DIPSHITS. FUCK OFF UNCLE SHAM and ALL YOUR PARTNERS IN CRIME.
"Meanwhile, we also heard first comments from new BoE member Vlieghe, who was seemingly in no rush to raise rates and slightly more dovish at the margin. With regards to inflation, Vlieghe told lawmakers that ‘there are risks to either side, but given the current low levels on inflation the risks are probably skewed to the downside’."
Good boy. Glad to see another CB position has been filled with a straight-thinking "there's nothing left to do but print, it's only a question of how much" kinda guy.
Did something happen in the past few hours? Did we cross over into a parallel world? Or have I merely stumbled onto a Ruskie propaganda site? Whatevvverrr….like any young, compulsive guy, this is my new BFF website (after ZH of course)
Sputniknews.com
Look at some of the offerings (and I’m not in a position to dispute their legitimacy)
Headline: Russia's Anti-ISIL Operation Paves Way to Peace in Syria – US Media
(The US Media said this?)
http://sputniknews.com/politics/20151013/1028434131/Conducting-Airstrikes-Russia-Paves-Way-Peace-Syria.html#ixzz3oWoSNb00
And also this:
Headline: Washington Ready to Arrange US-Russia Flight Safety Mechanisms in Syria
(Washington said this?)
http://sputniknews.com/politics/20151014/1028490462/Safety-Mechanisms-Syria.html#ixzz3oWrpg3Ze
And then this:
Headline: ….France Says It Is Ready to Sell New Ships to Russia
(the French probably said this because they need the money!!)
http://sputniknews.com/world/20151014/1028492520/france-russia-hollande-ships.html#ixzz3oWpoKN2U
I thought there was going to be all out war but it seems I have been let down.
I have made prudent preparation decisions and have more dried pasta than you can poke a stick at, but all of a sudden we seem to have talk of compromise and group hugs!
WTF happened? FFS, I need clarity!
Plus on Sputnik there’s moar!
e.g. Russia’s reaction to MH17 – and (for a bit of eye candy) - a side tab with “Miss Lebanon” winner. (Spoiler alert for Lebanese men – there’s no “mono-brow”)
On the downside, there’s comments from Bill Clinton’s missus (the skull with eyes), which I’m sure most here will pigeon-hole, but I expect her/its comments have been put there for a reason…..Fuck, she’s …. well….I dunno……
But the good news is that there’s some other terrific people waiting in the wings to fill the void as the leading statesman. You know, that bloke from the Beverley Hillbillies - Jethro Bush, I think his name is – and the Commie bloke – Colonel Saunders.
If it’s of any consolation (and it shouldn’t be) – in the land down-under, they got rid of an elected Prime Minister last month and replaced him with a (former) private banker worth many millions – and at the same time the Foreign (Back-stabbing female) Minister is now strutting her stuff on the UN stage and been invited to rub shoulders with the Illuminati at parties.
Same old – Same old
Well thanks for suffering my first post - I’m on the other side of the world to most of you peeps, so…. um….yeah…I forgot where I was going with that… so… time for another frothy (or “suds” as Andy would call it)
We’ll see what happens during my nap time
su-sd
Velcome!
Nice.
Welcome
What happened to the Chinese stock market?
I go to the same sight, always, that has all the world markets. Chinese SM, at around 3100 is gone, replaced with A50 @ 9700.
Have they replaced the Shanghi composite with the A50?
Probably unrelated but, Yahoo Finance used to have the most up/down shares on my bookmark for the ftse, now they are gone. If I was a suspicious type, I'd think they didn't want me to look any more!
Paper products get ugly,reports of economic fraud and deception coming to a head, dollar down and Gold hammered. Fucking clown show!
Who are our governments if they expect everyone else to play by the rules except themselves? We wonder why there is corruption? Because there is no justice. So dont expect people to follow the rules if your leading example is deceit. The FED as the head of the bankers are the "criminal class", they are whats wrong with this market. That was a huge manipuation this morning. FUCK YOU TOO. IM Going to start pulling cash out of this fake P.O.S. Market and my Bank to protest. Its time to FUCK AROUND a bit.
So how do I get a downvote within 2 minutes of a post that has 3 links?
BTW - I'm not that young
Friday OCT 16 and Monday OCT 19 are days where you should pay special attention to a High or Low.
Last TripsTrading Cycle Model was OCT 13, spot on.
http://tripstrading.com/2015/10/13/sp500-time-to-panic/
http://tripstrading.com/2015/10/09/sp500-how-cycles-take-their-time/
http://tripstrading.com/2015/10/10/sp500-suffering-from-low-energy/
The possibility that the big fat Bengahzi thigh could follow zippy the fag is rather fucked the hell up and another reason to hord PM.
How do market participants get justice? Very simply we don’t, so why bother? FUCK THIS.
I don't think it will last today. There are certain correlated things I watch to tell me if a gold move is real or not. They didn't move with gold. Trading is always a gamble. But I bet we get a retrace to 1175 today. Of course, wait until after 8:30am to do anything.
Happy gold trading victory song for the connected, who see and understand everything.
https://www.youtube.com/watch?v=eidNKkQUF8g
Rare flawless victory!
Gold could still have some more upward movement on the medium-term, short-term some resistance can be expected though.
http://tripstrading.com/2015/10/12/gold-breaks-out-of-declining-trend-ch...
Signals for Silver are quite bullish
http://tripstrading.com/2015/10/10/silver-wave-4-in-play/
Charting a manipulated market says what?
At least it wasn't monkey hammered.