Standard Chartered

American consumers curbed their spending in December, a lackluster finish to a year marked by slowing consumption despite a steadily improving labor market and months of cheap gasoline.  But the biggest disappointment was the Retail Sales ex auto which was down 0.1% in December, below the 0.2% expected. Putting this miss in context, 66 out of 69 economists thought December retail sales ex autos would've been higher than actual. So much for those "gas savings" prompting Americans to spend, spend, spend...

“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”

"Crude oil prices, finally, have stabilised, and we shall go our far upon a limb here this morning suggesting very strongly that when nearby February WTI traded to $29.93 at its low yesterday amidst a great deal of very vocal consternation on the national business television channels that crude had “TRADED BELOW $30 PER BARRELL” that that was what we in the past had referred to as the “obscene number” and may well have been the low."

"Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets,” Horsnell said. "We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far."

Initially both European stocks and US equity futures were grateful that China has picked at least one asset class to prop up overnight, and rose in an extremely illiquid market with European shares gaining for first time in 4 days, as S&P futures rise even as the MSCI Asia Pacific ex-Japan index just fell to the lowest level in more than 4 years. However, as of moments ago the Stoxx 600 had faded all its earlier gains and was trading near the flatline, as an algo takes out all stops on the top and bottom once more, and looks set to move on to US futures shortly.

Once China set the Yuan fixing some 0.5% lower, the biggest drop since the August devaluation, all hell broke loose and unleashed a global selling panic after China's stock market was promptly shut down less than 30 minutes into trading, then European shares dropped the most in more than 4 months as Asian equities plunges, as did US stock futures, the dollar weakened against the euro and the yen; crude plunged to fresh 12 year lows. Gold rose.

Gold is one of the few investments that every investor should have in their portfolio. We are now at the dangerous end-game period of a very bold but very reckless & disappointing experiment with the world's fiat (unbacked) currencies. If this experiment fails -- and we observe it's in the process of failing -- gold will provide one of the best forms of wealth insurance. But like all insurance products, it only works if you buy it before you need to rely on it.

Update - Chinese stocks continue to plunge... Offshore Yuan surges on intervention.

Aside from 3 very small adjustments, The PBOC has fixed the Yuan weaker for the last 20 days, driving the mid-line to 6.3962 - the weakest since August 28th. After Chinese stocks collapsed on Friday, they are holding the losses for now as the biggest question remains just what the weighting will be for Yuan inclusion in The IMF's SDR basket (which looks set to be announced tomorrow - US time). Metals are tumbling (with Iron ore down 3.7%) and broad AsiaPac stocks are down around 1% as brokerages in China are plunging (Haitong -9.2%),

With oil exports to Europe having slipped from 13% of Saudi's total to just 10% in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel - the largest discount since February 2009... directly going after Russia's customer base.

• Euro zone growth weak in October, China services rally (Reuters)
• Stocks Rise With European Bonds on Stimulus Outlook; Euro Falls (BBG)
• VW Sinks Deeper Into Crisis as Scandal Spreads to More Cars (BBG)
• Republicans ask IRS to audit Clinton charity's finances (Reuters)
• PBOC Inadvertently Boosts Stocks With Dated Zhou Comments (BBG)
• As China’s Economy Slows, Consumers Pick Up Some of the Slack (WSJ)
• Plane crashes in South Sudan, witnesses say dozens killed (Reuters)

In an interview on CNBC's "Trading Nation," the Gloom, Boom & Doom Report editor revealed he may not be as bearish as some may think and that he is actually a “great optimist.”

The most entertaining overnight story has to do with the latest farcical development in the Chinese "market" when just after open, it was reported that PBOC Governor Zhou said a trading link with Shenzhen will start this year which promptly sent all Chinese brokerages soaring, and the Shanghai Composite jumped over 3%. And then, out of the blue, the PBOC said the undated comments were actually as of May. As Bloomberg put it, "China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015."

So far today's trading session has been a repeat of what happened overnight on Monday, when following a weak start on even more weak Chinese data, US equities soared on the first trading day of the month continuing their blistering surge since that dreadful September payrolls report, which as we showed was mostly catalyzed by a near record bout of short's being squeezed and covering, which accelerated just as the S&P broke the 2100 level.

As Beijing fights to keep "Mr. Chen" and his "yellow loafers," tea, and Snickers bars from smuggling billions out of the country on behalf of Chinese citizens fearing an economic implosion and a double-digit deval, capital account convertibility may counterintuitively be one of the PBoC's most effective weapons as loosening capital controls will both calm the panicked masses and support the IMF SDR bit. Still, as Citi's David Lubin puts it, "China should expect to see gross capital outflows for the foreseeable future [and] it's not even clear that SDR inclusion will lead to a net capital inflow to China." 

In our Chinese stock market wrap following Friday's unexpected rate cut, which saw the Shanghai Composite storm out of the gate, we said that "we would not be surprised to see China's stocks sliding back into the red very shortly as "sell the news" concerns return, and as the increasingly more addicted "markets" demand even more liquidity from central banks just to stay unchanged, let alone rise to new all time highs." Sure enough, with just minutes to go before the close, the SHCOMP wiped out all its daily gains and was set for a red close had it not been for the "national team" miraculous last minute intervention which was inevitable after Friday's PBOC rate cut, and which lifted the composite 0.5% into the green as the euphoria was rapidly evaporating.