Japan

Equities Soar, Oil Back Over $30 On Hopes For More Stimulus Following Disturbing Chinese Data

Last night's Chinese data deluge can only be classified with one word: bad. So if bad news was again bad news as many claim, both commodities (read oil), and US equity futures should be tumbling right now... but just the opposite is happening and in fact both Brent and WTI have already jumped over $30 this morning. This happens even as the IEA said this morning that global oil markets could “drown in oversupply,”  And yet this morning both commodities, global stocks and futures soaring? Simple: the following Bloomberg headline summarizes it: "Brent Rallies More Than $1 as China GDP Spurs Stimulus Bets," and where Brent goes, so goes risk, and the S&P.

Equity Futures Rise After Oil Rebounds From 12 Year Lows; US Markets Closed

With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.

Japan's Nikkei Closes Below 17,000 As Hong Kong Money-Markets 'Break' Again

With Hong Kong Dollar spot little changed (but pressing the weaker end of its peg band) and 12-month forwards suggesting notable weakness/depegging to come, it appears that the Hong Kong interbank lending debacle is far from over. While overnight money appears stable, 1-week Yuan HIBOR is up 370bps at 11.90%, and 1-month and 3-Month HKD HIBOR just snapped higher ( to Jan 2013 highs and July 2010 highs respectively). It appears comments from Hong Kong Monetray Authority's Norman Chan that it's just a matter of time before outflow of funds lead to the local currency hitting the low end of the peg sparked heavy medium-term demand for liquidity. Offshore Yuan is crepping back weaker (as is crude) after an early bounce but NKY ended below 17,000 - for the first time since September.

Cracks At The Core Of The Core

It is the “Core of the Core” that now concerns us the most. That is where Federal Reserve (and global central bank) policies have left their greatest mark. It is at the “Core of the Core” where momentous misperceptions and market mispricing have become deeply entrenched. It’s the “Core of the Core” that has attracted enormous amounts of “money” over recent years. It’s also here where I believe leverage has quietly been used most aggressively. Over recent years it became one massive Crowded Trade. Now the sophisticated players must contemplate beating the unsuspecting public to the exits.

How QE Crushes The Real Economy & Why The Secular Low In Treasury Yields Lies Ahead

The economy was supposed to fire on all cylinders in 2015. Sufficient time had passed for the often-mentioned lags in monetary and fiscal policy to finally work their way through the system according to many pundits inside and outside the Fed. Surely the economy would be kick-started by: three rounds of QE and forward guidance; a record Fed balance sheet; and an unprecedented increase in federal debt to $18.63 trillion in 2015, a jump of 86%. Further, stock prices had gained sufficiently over the past several years, thus the so-called wealth effect would boost consumer spending. But the economic facts of 2015 displayed no impact from these massive government experiments.

This Is What Janet Yellen Thinks Is The "Worst-Case Scenario" For The U.S.

"Japan’s deflation didn’t begin until the mid-1990s, a half-decade after the collapse of Japanese real estate and equity prices. Furthermore, during the early years of deflation, Japanese long-run inflation expectations remained well anchored, averaging about 1½ percent as measured by consensus forecasts. So, unfortunately, a Japan-style deflation remains a relevant worst-case scenario for us going forward."

Dow Dumps 250Pts, Nikkei Plunges 500Pts After China Credit Concerns, Kuroda Comment

It appears the world is ganging up on The Fed as following China's recent clear and present threat should the USD strengthen, BoJ's Kuroda warned that further QQE might threaten the bank's finances - implicitly demanding moar from Yellen because he knows he's out of bullets. Add to that the surge in China credit which merely extends the life of already zombified firms, thus spreading more deflationary stress to the world and stocks from China (SHCOMP -3%), Japan (NKY -500) to US (Dow -280 points from Bullard Bounce highs) are tumbling.

"Markets Crash When They're Oversold"

When markets begin a "bear" cycle, they can remain in an oversold condition for extended periods. There is an important 'truism' to remember - "Markets crash when they’re oversold."