Copper

The biggest event overnight came from Europe, where Draghi managed to once again jawbone the Euro lower by ober 50 pips when he told European lawmakers in a prepared testimony that downside economic risks are "clearly visible," repeating his October press conference statement, adding that the ECB will reexamine degree of accommodation in December as "inflation dynamics have somewhat weakened." And the statement that crushed the Euro: "If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained." I.e., another "whatever it takes" moment.

Below is a "help wanted" ad for a "trader" by the infamous 3Red "spoofing" outfit.  We put trader in quotation marks because... well, just read the ad and you will see.

Now that there are "no taboos," and assuming the ECB doesn't take our advice on the '52 Mantles or the lumber, the only question is whether the central bank will pair a depo rate cut with the PSPP expansion (in whatever form it takes)....

After a disappointingly un-uber-dovish speech this morning by Draghi,it appears The ECB needed to full ease-tard to make sure 'markets' believe. EURUSD tumbld 50 pips - to the lows of the day - after Reuters reports that, in what is becoming increasingly clear desperation, The ECB is mulling buying the debt of cities and regions.

Bloomberg's global commodities index is testing fresh 16 year lows but this is often excused on the basis that it includes crude oil weakness - which will mean-revert higher any day now. Perhaps the bigger, even louder warning signal is directly from the basest of base industrial metals... which are now down 50% from their 2011 "reflate the world" highs.

• GOP debate winners and losers (Hill)
• European Stocks Rise as Dollar Weakens; Metals Decline on China (BBG)
• Global shares shrug off mixed China data, copper teeters near six-year low (Reuters)
• Fed's Evans: Looking forward to time when Fed can raise rates (Reuters)
• Alibaba’s Global Ambitions Face Counterfeit Challenge (WSJ)
• China Rebalancing Takes Hold as Output Slows, Retail Jumps (BBG)

For the third day in a row, China dominated the overnight newsflow with the latest industrial output data, which printed at 5.6% missing expectations of a 5.8% increase, and was tied with March for the lowest print since late 2008.

The PBOC weakened the Yuan fix for the 7th straight day - the longest such streak of 'devaluation' since 2012 - which appears to have helped fuel yet another day of gains for China's most-levered Shenzhen and ChiNext stock indices (even though the USDollar is losing altitude against Asian FX). At the break we note that the lower beta CSI-300 and Shanghai Composite are diverging lower. Meanwhile, over in real economy land, Copper is hitting new lows, nickel is weak, zinc is down, and China Containerized Freight Index just hit a new record low... but when has any of that ever mattered?

Once again we feel the close tug of systemic illiquidity as it transcends the usual noise about assurances to ignore or trivialize all this growing uncertainty. Even though stocks and other assets have been trading in their own world mostly free from all this more hidden esoterica, the full weight of this analysis suggests that can’t be more than a temporary deviation. Since it is the angle of economy that is ultimately driving all of this, everything depends upon a global economy that has already been beaten down far past anticipation.

The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.

A busy night in Asia began with a total collapse in Philippines Exports (-24.7% YoY - the biggest miss since Lehman). This was quickly followed by a 0.3% drop (deflation) in CPI MoM (thanks to a drop in pork -1.9%, eggs -6.9%, and veggies -5.6%) which sparked buying in stocks (because moar stimulus). Chatter of a few large fund houses under investigation stymied the rally quickly but as nobody was summoned stocks recovered, then rallied strongly back into the green on renewed chatter of Stock Connect occurring sooner than expected. With CSI-300 (China's S&P 500), up at the break, this is the longest winning streak since the peak of the bubble in May. And finally Shanghai Copper and Nickel tumbled to new multi-year lows, dragging Bloomberg's Commodity Index to fresh 16-year lows.

Once again, the two major macroeconomic announcements over the weekend came from China, where we first saw an unexpected, if still to be confirmed, increase in FX reserves, and then Chinese trade data once again disappointed tumbling by 6.9% while imports plunged 18.8%. So how did the market react? The Shanghai Composite Index rose for a fourth day and reached its highest since August 20because more bad data means more easing from the PBOC, and just to give what few investors are left the green light to come back into the pool, overnight Chinese brokers soared after Chinese IPOs returned after a 5 month hiatus. Elsewhere, Stocks and currencies in emerging markets slump on prospect of higher U.S. borrowing costs before year-end and after data underscored slowdown in Asia’s biggest economy. Euro strengthens.

With crude stocks moving up solidly despite inventories being still almost one-third above the “cycle” trend from 2009 through 2014, the economics of that behavior suggest the opposite of what the FOMC would like to project. And that would seem to bridge the eurodollar curve’s front and back ends, aligning it with commodities more generally. In that view, eurodollar futures are suggesting exactly what they have been for almost a year and a half – that the Fed might or might not act, but if they do it won’t alter the economic course but only wield the potential to make a bad (and growing more so) physical and general economy situation that much worse.

The developing deflationary cycle stunting the world economy has arisen from the monumental harm that central bankers have already done, not from lack of sufficient vigor and boldness in attempting to contravene its consequences.