Market Snapshot - Reaction To Wen's Ultimatum

Tyler Durden's picture

An hour after Chinese Premier Wen Jiabao dropped all pretense of working together for the greater good, markets around the world are reacting more notably than many would have expected. With most talking heads still clinging to the line about 'helping the Europeans' and missing the quid-pro-quo of it all that we so clearly intimated from his speech, expectations of a risk-on 'we-are-all-saved' reaction have been dashed on a beach of the-trade-wars-have-begun.

ES is -13pts from the day session close (and almost 20pts from intraday highs), having taken out intraday swing support levels around 1154.

 

The USD is rallying as EUR lost 1.37 and 1.3650 quite quickly and JPY crosses are falling - most notably KRWJPY, ZARJPY, NZDJPY, and AUDJPY for now.

Chart: Bloomberg

 

Risk-assets broadly are being sold as is evident by the significantly weak reaction from the risk-basket CONTEXT indicating further weakness in ES may be to come overnight (unless of course more rumors miraculously appear).

TSYs are rallying, 2s10s30s dropping, and as the USD strengthens so Oil (<$90), Copper (<$395), Gold (<$1840), and Silver (<$41) are all losing ground. All-in-all, not exactly what the doctor ordered but we are less than surprised by the gamesmanship given the world's placing of the Chinese on a pedestal.

 

UPDATE: Just for good measure, its not just the Western world selling off, in the reverse psychological reacharound that is a wholly un-decoupled world, KOSPI is down more than 3%

Chart: Bloomberg

And a plethora of schizophrenic quotes abound from the Chinese, including but not limited to:

*CHINA SHOULD BUY MORE EUROPEAN COMPANY STOCKS, PBOC'S LI SAYS

 

*CHINA SHOULD CONTINUE TO BUY ITALY BONDS IN SHORT TERM, LI SAYS

and this (from Bloomberg):

China shouldn’t buy bonds issued by individual euro-area countries because their leaders and the European Central Bank are in disarray, said Yu Yongding, a former adviser to China’s central bank.

 

“China has to wait until it can see a clearer road map by euro countries for solving sovereign-debt problems,” Yu, who is based in Beijing, said in e-mailed comments today. The nation is not a lender of last resort for “troubled countries,” he added.

and finally this:

PBOC Adviser: China Must Get Own Policies Right Before Helping Others; EU Must Make Pragmatic, Tangible Decisions On Fiscal Reform