Just when you thought it was safe to listen to the stability-preaching talking heads, crude futures are sliding and US equity futures are tumbling as Asia opens. Worse still XIV (VIX inverse ETF) has tumbled to fresh lows with a 24 handle in the after-hours market, suggesting more downside for stocks. With all eyes on China PMIs - though, there is little need for a weak PMI to be present for China to unleash moar measures, and a strong PMI will be scoffed at - it seems, the end-of-month rip-fest is fading fast...
Oil is sliding back..
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As Goldman explains,
within the context of the global oil market balance, rising OPEC and elevated non-OPEC ex. US production leave the global oil market still oversupplied with a decline in US production in 2016 increasingly likely to halt the build in inventories. For example, OPEC production rose by 485 kb/d between April and June as US production declined by 316 kb/d.
As a result, we reiterate our view that oil prices have to remain low, with our near-term WTI forecast of $45/bbl, to rebalance the oil market by late 2016
but US equity futures are tumbling... back to Thursday JPM crash levels...
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Front-month VIX futures surge back to Monday's highs...
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As XIV tumbles... well below the scene of Friday's crime...
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And VXX nears Monday's flash-crash highs...
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For if we learned one thing last week, it is the suddenly-illiquid ETF tail wagging the dog underlying assets that creates the big air pockets in today's markets.
Charts: Bloomberg
