Monday 24 August 2015

The collapsing world economy - 08/23/2015

Black Monday in China goes almost unreported in New Zealand. It looks as if the crash is happening.


Have a look below for what is happening to world shipping. Ships are full and nowhere to go.

China stocks in morning freefall as pension fund rules fail to inspire

China major stock indexes collapsed on Monday morning, with traders saying market disappointment over the lack of a liquidity move by the central bank during the weekend triggered a fresh selloff.
Investors talk in front of an electronic board showing stock information at a brokerage house in Beijing
.

24 August, 2015

Main indexes tumbled more than 11 percent last week as investors began to worry that the central government was backing off on plans to prop up the market.

The worry was aggravated by a strong injection of short-term liquidity into the interbank market that many read as a substitute for deeper easing.

The CSI300 index fell 6.7 percent to 3,349.20 points at 0149 GMT (12.49 a.m. BST), while the Shanghai Composite Index (.SSEC) lost 6.6 percent to 3,277.94 points, its lowest level since March.

China CSI300 stock index futures for September fell 7.1 percent, to 3,233.6, or 109.37 points below the current value of the underlying index, and all other futures contracts were also negative.
China shares wipe out 2015 gains as stocks tumble 8.5% MarketWatch q 11 mins ago

Asia markets rattled to join in global equity rout MarketWatch q 3 hrs ago

"The market is in a downtrend. There's no good news, stocks are still expensive, and there's no fresh money coming in," said Qi Yifeng, analyst at consultancy CEBM.

"With no RRR (reserve requirement) cut over the weekend, the market will directly head south."

The Hang Seng index (.HSI) dropped 3.7 percent, to 21,586.98 points.

The Hong Kong China Enterprises Index (.HSCE) lost 4.5 percent, to 9,732.62.

Investors failed to take inspiration from the formalisation of rules allowing pension funds to invest in the stock market over the weekend.

"The pension fund news will not help, because the money is limited, you don't know when the money will come in, and the purchase is not sustainable," said Qi.

"Black Monday" - Shanghai Composite Goes Red For The Year, Wiping Out 60% In Gains, 2000 Stocks Limit Down


23 August, 2015
Black Monday! #ChinaStocks join global panic selloff, dive 8.5%, worst since Asian financial crisis at middaypic.twitter.com/nLHoFf34bV
China Xinhua News (@XHNews) August 24, 2015
FACTS: By midday break, nearly 2000 stocks down 10% daily limit in Chinese market -- only 13 stocks up; Shanghai benchmark index down 8.45%
George Chen (@george_chen) August 24, 2015


Judging by the first few minutes of trading in the first thing to open this evening on the mainland, the CSI 300 Index Futures which immediately tumbled by 4% to 3340, China's attempt to deflect attention from the fact that it did not do a 50-100 bps RRR cut is not doing too well.




Some other indicative levels which are in line with the CSI:
  • Shanghai Composite to open -3.8%, some 130 points below the 3,500 "hard line" support level below which it is a nothing but air back to 2000
  • Shenzhen down 4.3%
  • ChiNext down 5.1%
That said, we expect the National Team to not give up without a big fight, and forcefully step in any minute and do everything in its power to prevent the resultant plunge in the Shanghai Composite which is set to open shortly, or else SHCOMP 2000 beckons, and with it lots and lots of social unrest.

* * *
Update: Shanghai Composite now down -5.7%



And the 3,500 support is now gone.



Update 2: Shanghai Composite crashing, now down 7%



Update 3 and final: SHANGHAI COMPOSITE INDEX ERASES YEAR'S GAINS



This news has gone unreported so far on Radio NZ; there is this from the more business-minded NZ Herald.

NZ shares plunge 2pc, Australia in meltdown


The S&P. NZX50  index has fallen by about 5 percent since its August 3 peak.

New Zealand share market slumped 2 per cent and almost $60 billion has been wiped from Australia's share market as concerns about China's economy shake global investors.

The S&P/NZX 50 Index was down 115 points at 5635, wiping about $2 billion off the NZ market

As other markets took a tumble, and Australia faced a bloodbath, experts said the New Zealand share market was more resilient to overseas falls.


If this isn't an indication of a rapidly tanking economy then nothing is.

Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks


23 August, 2015

Three weeks ago, when we last looked at the collapse in trade along what may be the most trafficked route involving China, i.e., from Asia to Northern Europe, we noted that while that particular shipping freight rate Europe had crashed some 23% on just one week, there was some good news: at least the Baltic Dry index was still inexplicably rising, and at last check it was hovering just above 1,100.


That is no longer the case, and just as with everything else in recent months, the Baltic Dry dead cat bounce is now over, with the BDIY topping out just above 1200 on August 4, and now back in triple digit territory, rapidly sliding back to the reality of recent record lows which a few months ago we suggested hinted that much more is wrong with global trade, and the global economy, than artificially manipulated stock markets would admit.



More importantly, a major source of confusion appears to have been resolved. Recall that as we noted on August 3, "many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible. We may have the answer."


We did. To wit:







"Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes, which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession."


As expected, on Friday, we got confirmation that the BDIY has indeed become a lagging indicator to actual demand, when Reuters reported in its latest weekly update using data from the Shanghai Containerized Freight Index, that key shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 26.7 percent to $469 per 20-foot container (TEU) in the week ended on Friday.


The collapse in rates is nothing short of a bloodbath: "it was the third consecutive week of falling freight rates on the world’s busiest route and rates are now nearly 60 percent lower than three weeks ago.


Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand in goods to be transported. Rates generally deemed profitable for shipping companies on the route are at about $800-$1,000 per TEU.


Other Europe-focused freight rates did even worse, with container freight rates from Asia to ports in the Mediterranean plunging 32.1%, while those to the US West and East coast slid by 7.9% and 9.9%, respectively.


This should not come as a surprise: it was back in March when we first reported that "Global Trade Volume Tumbles Most Since 2011; Biggest Value Plunge Since Lehman."


I
t took the no longer discounting "market" about 6 months to figure this out. As for the culprit, no question who is at fault.
HK cargo container throughput July -9.5% yoy, recorded 13 consecutive months decline, worst in modern history.
Simon Ting (@simonting) August 22, 2015
@simonting Singapore TEU -13.2% too, worst since Lehman crisis.
Simon Ting (@simonting) August 23, 2015


What happens next?


Well, some, such as the world’s largest container shipping company, Maersk Line, will desperately try to no longer lose money on every transit, with a plan to raise spot freight rates by $1,000 from ports in Asia to ports in northern Europe, with effect from Sep 1. Other major container shipping companies have similar plans.
The virtually guaranteed outcome of this "strategy", as there is simply not enough demand as the world careens off the global recession cliff to offset a surge in freight costs, will be an even greater collapse in trade volumes.


The alternative, is just as bad: as we sarcastically hinted first in March:







... none of the above should alarm anyone: remember - central banks can just print trade with just the flick of a CTRL-P switch.


And then again three weeks ago when we said no need to worry because it is just a matter of time before "central planners learn how to print trade."


For now, however, printing money no longer equates to boosting global trade. In fact, easy monetary policy now appears to be backfiring, as even the "market" has figured out.



So, sarcasm aside, what really happens next, to both shipping, trade, the global economy and markets? Sadly, unless central planning finally works after 7 years of failing ever upward... this.




USEquity Futures Are Crashing












Bloomberg's Commodity Index Just Hit A 21st Century Low



After the Bloomberg commodity index crashed overnight, having tumbled for each of the past 4 years, this happened:


  • BLOOMBERG COMMODITY INDEX SLIDES TO LOWEST LEVEL SINCE 1999
Said otherwise, the lowest level in the 21s centiry. 



Yup, rate hike any minute now.



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