Barring some miraculous 8% epic melt-up in the afternoon session - go down as the worst ever January for Chinese stocks. While that is a big enough deal, for now the 24%-plus plunge is the worst of any month since Lehman's fallout in October 2008. However, it is close... if the Shanghai Composite closes below 2667.50 today, January 2016 will become the worst month for Chinese stocks since 1994... quite a feat in a "stable" and manipulated market.
If the eurodollar and wholesale banking system had been sliced to such a thin margin again by 2011 so as to so heavily depend on the modern duality of gold, it not only would not survive it literally could not survive. The paper dilution we see now may just be that judgement finally seeking open admission.
According to a Goldman report, so far in January "there has been around $USD 185bn of intervention (with the recent intervention predominantly taking place in the onshore market)" split roughly $143 billion on the domestic side and $42 billion on the offshore Yuan side
With The Fed definitely off the table, China promising nothing but daily liquidity drips, and Europe unable to do anything but jawbone, the world's bullish equity market investors are anxiously trawling for a central bank to save the world. Tonight's BoJ meeting could well be it - though judging by their past epic failures - it will be anything but successful as QE23 looms in Japan. “The need for a Kuroda bazooka is increasing,” said Yuji Shimanaka, an economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “This is decision time for Kuroda” as additional stimulus can stop the trend of yen gains and falling stocks.
There is something rotten in the state of Denmark. And we are not talking just about the hapless socialist utopia on the Jutland Peninsula - even if it does strip assets from homeless refugees, charge savers 75 basis points for the deposit privilege and allocate nearly 60% of its GDP to the Welfare State and its untoward ministrations. In fact, the rot is planetary. There is unaccountable, implausible, whacko-world stuff going on everywhere, but the frightful part is that most of it goes unremarked or is viewed as par for the course by the mainstream narrative.
Europe’s biggest lender HSBC will no longer provide mortgages to some Chinese nationals who buy real estate in the United States, a policy change that comes as Beijing is battling to stem a swelling crowd of citizens trying to get money out of China. However, ass HSBC closes the door, the panicking Bank of Canada scrapped its C$1.25 million cap on mortgages to borrowers with no local credit history (to tap into surging demand for financing from wealthy immigrant buyers).
As the great and the good gathered in Davos to ponder the next big thing, the pummeling of global equity markets brought key assumptions into question. Yet, their collective heads stayed buried in the snow with regard to the big ideas from years past, namely, the three grand economic experiments launched by the U.S., Japan and China following the Global Financial Crisis. By clinging to unrealistic growth expectations, the economic establishment has effectively bet everything on the success of these grand experiments, and the risk of losing that bet is rising inexorably.
According to the head of financial markets research Asia Pacific at Rabobank, Michael Every, not only has China not begun to delever at all, but since McKinsey's update, its debt has risen by another 70% of GDP! According to Every, China's 2015 debt-to-GDP might be as high as 346%, and while that is in line with wealthier developed economies but is “vastly higher” than any EM peer.
The mother's milk of stock market returns is turning increasingly sour...
We tend to assume our system for understanding the cause of failure must be sound, because we've experienced Roaring Success for so long. Rip-Roaring Success can destabilize in a number of ways.
CAT confirmed the flow through from its depressed retail sales picture when it announced that not only did revenue tumble by 23% to $11 billion, but it missed already deeply cut estimates of $11.4 billion, leading to a 111% collapse in operating profit which from $1.1 billion turned into a $114 million loss in the quarter. To be sure, the company tried to pull an Alcoa and stuff massive restructuring charges in the quarter amounting to $689, boosting non-GAAP EPS by $0.89 to $0.74, however one can simply ignore this latest accounting fudge attempt.
- Unease over Fed rate path dents European stocks (Reuters)
- Global Stocks Pressured After Fed Statement (WSJ)
- Japan's Economy Minister Amari to Resign Over Graft Scandal (BBG)
- Authorities working to clear remaining protesters in Oregon occupation (Reuters)
- China Sharpens Efforts to Halt Money Outflow (WSJ)
- Eurozone January Economic Sentiment Falls Sharply, Hits 5-Mth Low (MNI)
Following the Fed's disappointing "dovish, but not dovish enough" statement which effectively admitted Yellen had committed policy error by hiking just as the US economy "was slowing down" which in turn lowered the odds of a March rate hike to just 18%, it was up to oil to pick up the correlation torch, and so it did, rising in an otherwise mixed session which has seen European stocks slide on continued weakness surrounding Italian banks, many of which have been halted limit down, while Asia was treading water following news of the resignation of Japan’s "Abenomics" minister Akira Amari to over a graft scandal, and yet another day of Chinese stock dropping.
... Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”
The PBOC FX intervention team continue to be busy in offshore Yuan this week as for the 4th time in 3 days, a mysterious panic-buyer lifted CNH between 5 and 10 handles higher for no good reason other than to show George Soros (and Bill Ackman) who is boss (i.e. drive away the shorts). In keeping with the recent "stability" the Yuan fix was flat but another 340bn Yuan was injected - except China CDS pushes to Aug 2015 wides indicating severe stress and suggesting devaluation looms.