• Vitaliy Katsenelson
    10/07/2015 - 12:23
    Having government control over the levers of the economy can have advantages. For example, by taking prompt action, the Chinese government was able to pull the economy out of the recession remarkably...


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Asia FX Soars On China Reserves Relief As Ringgit Reversal Catches Traders Wrong-Footed

"We are still in a very cautious environment for emerging-market currencies and unless there is a sharp turnaround in commodity prices or capital flows, I still think there’s going to be pressure on the ringgit and the rupiah."

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Five Of The Past Six Times Corporate Margins Have Plunged This Much, Ended In A Recession

Overnight Barclays looked at the link between the current state of corporate profits, plunging by 60bps, and the broader economic cycle. It used data set stretching to the last seven business cycles, dating back to 1973, and found that on 5 out of 6 occasions, such a drop in margins resulted in a recession. In Barclays' own words: "the results are not encouraging for the economy or the market."

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RANSQUAWK WEEK AHEAD - 5th October: BoJ, RBA and BoE are all set to announce their latest rate decision this week, while the FOMC will release the minutes from their September meeting, while Alcoa unofficially kick off earning season on Wall St.


· BoJ, RBA and BoE are all set to announce their latest rate decision this week, while the FOMC will release the minutes from their September meeting

· Alcoa unofficially kick off earning season on Wall St., with analysts forecasting the first Y/Y EPS decline since 2009

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A Hapless Brazil Incurs Massive Losses On FX Swaps Amid Currency Carnage

"It is not a problem of liquidity, but of fundamentals"...

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Frontrunning: October 2

  • U.S., Allies Demand Russia Stop Attacks on Syria Opposition (BBG)
  • Russian Airstrikes Defend Strategic Assad Regime Stronghold on Syria’s Coast (WSJ)
  • Emerging Stocks Head for Weekly Advance Before U.S. Jobs Data (BBG)
  • Wage Strife Clouds Car-Sales Boom (WSJ)
  • Oregon town reels from classroom carnage (Reuters)
  • Oregon shooter came from California, described as shy and skittish (Reuters)
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Calm Before The Payrolls Storm

With China markets closed for holiday until the middle of next week, and little in terms of global macro data overnight (the only notable central banker comment overnight came from Mario Draghi who confidently proclaimed that "economic growth is returning" which on its own is bad for risk assets), it was all about the USDJPY which has seen the usual no-volume levitation overnight, dragging both the Nikkei higher with it, and US equity futures, which as of this moment were at session highs, up 7 points. The calm may be broken, though, as soon as two hours from now when the September "most important ever until the next" payrolls report is released.

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Wall Street Banks Admit They Rigged CDS Prices Too

As Bloomberg reports, "JPMorgan Chase & Co. is set to pay almost a third of a $1.86 billion settlement to resolve accusations that a dozen big banks conspired to limit competition in the credit-default swaps market, according to people briefed on terms of the deal."

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Frontrunning: September 29

  • Commodities in crisis as Asian shares tumble and shipper files for bankruptcy (Reuters)
  • Global Rout Eases as S&P 500 Futures Advance With Oil, Glencore (BBG)
  • Chinese Stocks Decline Most in a Month in Hong Kong on Economy (BBG)
  • India cuts interest rates by more than expected (BBC)
  • Glencore Rebounds as $50 Billion Plunge Is Seen as Excessive (BBG)
  • How Congress May Have Saved Goldman Sachs From Itself (BBG)
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UBS Is About To Blow The Cover On A Massive Gold-Rigging Scandal

Unlike previous gold probe cases, this one will have major consequences. How do we know? Because just like in LIBOR-gate, just like in FX-gate, it is the biggest rat of all, Swiss megabank UBS, that is about to turn on its former criminal peers.  As Bloomberg reported earlier "UBS was granted conditional leniency in Swiss antitrust probe of possible manipulation of precious metal prices." Why would UBS do this? The same reason UBS did so on at least on two prior occasions: the regulators have definitive proof it is involved, and gave it the option to turn evidence and to rat out its cartel peers, or face even more massive financial penalties. UBS, as usual, choice the former.

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Frontrunning: September 28

  • Headline winner: "Read Beyond Massive Job-Cuts Headlines: Labor Market Is Fine" (BBG)
  • And speaking of lies: The More Yellen Talks Up Inflation, the Less Traders Believe Her (BBG)
  • How Some Investors Get Special Access to Companies (WSJ)
  • Victorious Catalan separatists claim mandate to break with Spain (Reuters)
  • Russia seizes initiative in Syria (Reuters)
  • Former VW boss Winterkorn investigated for fraud (Reuters)
  • Investors Pull Back From Junk Bonds (WSJ)
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US Futures Resume Tumble, Commodities Slide As Chinese "Hard-Landing" Fears Take Center Stage

It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."

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"Nothing Is Working" - The Markets Just Aren't That Into You

With just 3 months left on the calendar, many investors are down on the year for one simple reason: nothing is really working.  That leaves them only a short period to show a positive return, or at least a less-negative result than whatever index they track. To do that, many will have to make very specific and concentrated bets. It might be about equities generally – will they recover from the current growth scare?  Or it might be asset allocation – will bonds finally go up on the year?  For stock pickers, the key question is certainly “Play the winners, or look for laggards?” All we know is that with 69 days left to play catchup, time favors the fleet.  And the bold.

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As SEC Rolls Out Liquidity Risk Plan, Here Are The Bond Funds That May Be Most Vulnerable In A Meltdown

With the SEC moving to head off the risk of a bond market meltdown triggered by a dangerous combination of illiquidity and bond fund proliferation, WSJ decided to see which fund providers are the most at risk in a crisis. The list may surprise you...

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China's "Reverse QE" Could Top $1.2 Trillion, Barclays Says

"In such a downside scenario there could be pressure on the central bank to provide about 10-12% of GDP in reserves to the market to offset outflows as well as hedging demand (which could be met by intervening in forward markets). This is roughly USD1.0-1.2trn – that would be about 30% of its current reserve portfolio."

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