Yuan

In a weekend of very little macro newsflow facilitated by the release of the latest Star Wars sequel, the biggest political and economic event was the Spanish general election which confirmed the end of the PP-PSOE political duopoly at national level.  As a result, there was some early underperformance in SPGBs and initial equity weakness across European stocks, which however was promptly offset and at last check the Stoxx 600 was up 0.4% to 363, with US equity futures up nearly 1% after Friday's oversold drubbing. In other key news, the commodity slide continues with Brent Oil dropping to a fresh 11-year low as futures fell as much as 2.2% in London after a 2.8% drop last week.

Since The IMF 'blessed' the Yuan with the same ambivalence-to-currency-manipulation as the rest of the world's competitive devaluers, China weakened the currency for 10 straight days (a record streak). But the streak is over as tonight PBOC has decided to strengthen the Yuan fix (although admittedly by a small amount) to 6.4753 (barely off the 4 year lows).

“If you’re pushing for lower management fees to save minimal basis points on a fund where you are unhappy with performance, as a fiduciary, you have to decide whether you want to keep that fund at all.”

If you had any doubt about whether the doomsayers were telling the truth about soaring NPLs in China, look no further than Huarong Asset Management Co, which is set to auction some $8 billion in sour loans on Taobao. As Barclays notes, "AMCs in general will more frequently resort to a “wholesaling model” for distressed asset disposal, given the increasing NPL supply amid the current credit cycle."

“Communist Party graft busters have been taking officials, one by one, to a hotel close to the [CSRC’s] headquarters to press them to come clean or report on others."

In the first two weeks of August 2008 (just a month before Lehman imploded), as tensions built in US financial markets, China weakened the Yuan for 10 straight days. Tonight, China just extended its streak of weakening the Yuan fix to 9 days (for an aggregate 1.4% devaluation, the largest such drop outside of August's devaluation in history). This pushes the Yuan back to June 2011 levels.

China did everything it could to prevent a collapse and it still happened.  How do you think other countries will do?

"When the Fed moves next will depend importantly on how inflation evolves. The Fed’s preferred measure of inflation has run below its 2% objective for more than three years. The central bank focused extra attention on the inflation outlook in its statement, saying it would “carefully monitor” actual and expected progress toward the goal. This point implied the Fed will be reluctant to raise rates again unless it sees inflation actually moving up. For now, officials said they were “reasonably confident” inflation would rise."

There is a Category 5 deflationary hurricane forming off the Chinese coast as Beijing accelerates the devaluation of the yuan against the dollar under the guise of “reform”. I say forming … the truth is that this deflationary storm has already laid waste to the global commodity complex, doing trillions of dollars in damage. I say forming … the truth is that this deflationary storm has driven inflation expectations down to levels last seen when the world was coming to an end in the Lehman aftermath. And now the Fed is going to tighten? Are you kidding me?

The start of the Fed's most eagerly awaited two-day policy meeting in years has finally arrived with the market expecting Yellen to announce the first 25 bps rate hike in 9 years tomorrow with nearly 80% probability, and so far US equity futures are enjoying a last minute relief rally, while emerging market stocks rose for the first day in ten after the longest losing run since June. Europe's Stoxx 600 Index has also rebounded from a five-day losing streak, the worst in over four months.

The Yuan fix has now weakened for 7 consecutive days. Aside from the August devaluation, this is the biggest devaluation in the Yuan since records began in 2004. At the current level of 6.4559 per dollar, the Yuan has retraced to the level it was at when QE ended in July 2011. Chinese stocks are fading a smidge after yesterday's afternoon session "rescue" ramp.

Several local officials in China's Northeast region sought to explain dramatic economic drops in their areas by admitting they had faked economic data in the past few years to show high growth when the real numbers were much lower, Xinhua News Agency reported on Friday. The report cited several officials in the region who acknowledged they had "significantly overstated data ranging from fiscal revenue and household income to GDP."

Jim Cramer - of all people - warned about this in 2007: watch the video inside!