Nikkei

The last time we looked at Chinese stocks, just a few hours ago, they were on pace to close back under 3000, following the latest collapse in trade, where in August exports dropped 5.5% (last -8.3%) while imports tumbled -13.8% in dollar terms (worse than the -8.1% prior). As the Reuters chart below shows, this was the 10th month in a row of declines and the worst stretch since the 2008 crisis, confirming China will need far more currency devaluation to stabilize the trade pain. And then Chinese authorities intervened with gusto, waiting until the start of the afternoon session, at which point a massive buying orgy ensued, and pushed the SHCOMP from down more than 2% to close at the day highs, up some 2.9%!

Whether it is due to thin holiday liquidity, due to the BOJ intervening just ahead of its usual time, because Japan's "legendary" Twitter trader "CIS" just went bullish (again), because prime minister Abe just learned he would be reinstalled as head of his ruling LDP party because no challenger had emerged unleashing three more years of unchallenged Abenomics, because Japan's Q2 GDP was just revised modestly higher (to a less negative number) or just because this is how the New Normal rolls, moments ago the Nikkei flash smashed higher some 400 points higher, in a well-choreographed algorithmic frenzy, to take out Friday's high stops.

Rickards said that gold is like “fire insurance on your house” ... “Nobody wants their house to burn down but if it does you are glad you have some insurance”. 

Chinese stocks opened with a bang, and as we previously noted soared higher at the open after China's long 4-day holiday weekend, which however subsequently slowly (but very surely) fizzled, eating away at the hope that the 3-day drop in the Shanghai Composite would finally come to an end following comments from PBOC governor Zhou that the recent rout in Chinese stocks is almost over, and result in a relief rally in Europe and the US. Alas, all that was promptly swept away at the end of trading in China when the Shanghai Composite tumbled at close of trading to confirm just how unpleasant a "death cross" is coupled with loss of central bank control, and to push the Shanghai Composite down 2.5% for the day and 3.4% for the year.

Keys in the week ahead:  equity markets--still look lower; China--volatility likely to continue; Fed--market says no Sept hike

The can is no longer rolling along. Instead, it has come to a near halt, with central bankers and government policymakers desperate to give it another boot. Watch out!

Moments ago, US equity futures tumbled to their lowest level in the overnight session, down 22 points or 1.1% to 1924, following both Europe (Eurostoxx 600 -1.8%, giving up more than half of yesterday's gains, led by the banking sector) and Japan (Nikkei -2.2%), and pretty much across the board as DM bonds are bid, EM assets are all weaker, oil and commodities are lower in what is shaping up to be another EM driven "risk off" day. Only this time one can't blame the usual scapegoat China whose market is shut for the long weekend.

By monetizing more than the entire Japanese budget deficit, the BOJ is running of out willing sellers. Without those, Japan's QE, just like that of the ECB, will grind to a halt. Better yet, this creates a vicious loop, because with every passing month, the inevitable D-Day when the BOJ has no more TSYs on the offer gets closer, which in turn will force those who bought stocks to sell in anticipation of the end of QE, and to seek the safety of bonds themsleves, in effect precipitating the next inevitable Japanese stock market crash.

With China closed today, the usual overnight market manipulation fireworks out of Beijing were absent but that does not meant asset levitation could not take place, and instead of the daily kick start out of China today it has been all about the ECB which as we previewed two days ago, is expected - at least by some such as ABN Amro - to outright boost its QE, while virtually everyone else expects Draghi to not only cut the ECB's inflation forecast, which reminds us of the chart which in March we dubbed the biggest hockeystick ever (we knew it wouldn't last) but to verbally jawbone the Euro as low as possible (i.e., the Dax as high as it will get) even if the former Goldmanite does not explicitly commit to more QE.

While many continue to debate if what with every passing day increasingly looks like a global recession, one from which the US will not decouple no matter how many "virtual portfolio" asset managers claim the contrary, there are those who without much fanfare are already taking proactive steps to avoid the kind of fallout that the markets have hinted in the past month of trading, is inevitable. Some such as Calstrs: the nation's second largest pension fund with $191 billion in assets (smaller only than Calpers), which as the WSJ reports is "considering a significant shift away from some stocks and bonds amid turbulent markets world-wide."  According to the WSJ, it will move as much as $20 billion, or 12% of the fund’s stock  portfolio, into other assets, including Treasurys.

Since today was the last day of trading for Chinese stocks this week ahead of the 4-day extended September 3 military parade holiday to mark the 70th anniversary of the allied victory over Japan, and since Chinese stocks opened to yet another early trading rout coupled with the PBOC's biggest Yuan strengthening since 2010 as we observed earlier, there was only one thing that was certain: massive intervention by the Chinese "National Team" to get stocks as close to green as possible. Sure enough they tried, and tried so hard the "hulk's" green color almost came through in the last hour of trading and yet, despite the symbolic importance of having a green close at least one day this week ahead of China's victory over a World War II foe, Beijing was unable to defeat the market even once in the latest week which will hardly bode well for Chinese stocks come next week.

Chinese stocks are opening lower: SHANGHAI COMPOSITE INDEX FALLS 4.6% TO 3,020.84 AT OPEN as PBOC fixes Yuan stronger for the 4th day in a row - the most in 5 years.

China credit risk has spiked to 2-year highs as traders increase positions dramatically.

While the market's attention overnight was focused on China's crumbling manufacturing and service PMI, data which was already hinted in the flash PMI reports earlier in August, the real stunner came not from China but from South Korea, which last night reported an unprecedented 14.7% collapse in exports, far worse than the -5.9% consensus estimate, and more than 4 times worse than July's 3.4%. The number is critical because not only do exports account for about half of South Korea's GDP but because it also happens to be the first major exporting country to report monthly trade data. That makes it the perfect barometer of global trade flows, or as the case may be, the canary in the global trade coalmine. It also confirms what we reported just one week ago when we said that "Global Trade Is In Freefall."

Gold rose 3.5% in August as stocks globally saw sharp falls on growing concerns about the Chinese and the global economy.