Just before the European close, copper prices on the LME (and US futures) began to crack on rumors that another China corporate had defaulted. This plunge was accompanied by a collapsed in AUD and rumors across desks were a levered fund unwind (which appears some China-commodity play) was responsible. While many would like to believe that fundamentals matter, today made it clear they don't as AUDJPY weakness dragged stocks lower tick-for-tick. A brief moment of hope in the early-afternoon - where VIX was slammed lower as momentum away from carry was sparked failed and stocks continued to slide, retracing a considerable amount of post-Putin gains. Bonds and gold were bid (after the latter suffered early) as WTI crude slipped back under $100 and copper was crushed.
AUDJPY led the S&P lower... (note the brief hope in blue) where stocks disconnected higher...
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Which was driven by a slamdown effort in VIX (blue)
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With AUD's collapse starting as Europe closed along with Copper's dive...
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All major indices fell today - retracing much of the post-Putin gains...
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Bonds remain discnncted from stocks thanks to the squeeze on Friday with payrolls - we suspect the bearish bias is being sustained thanks to the massive size of corporate issuance recently and need for rate-lock hedging by dealers...
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Gold outperformed and caught back up to Putin levels but overall commodities suffered on the day...
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FX markets have been domianted by AUD strength and JPY weakness since Putin but that is unwinding rapidly - note that the USD Index is now unchanged since Putin's speech!
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"Most Shorted" stocks are getting hammered relative to the market (which is thi new normal is worrisome as it provides more ammo for the next ramping leg.. until it doesn't)...
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Credit markets remain very skeptical...
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Charts: Bloomberg
Bonus Chart: The hedge-fund hotel GSEs took it on the chin. Presenting - the Ackcat
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