Crude Oil Slides Below $28, Lowest Since 2003, Dragging US Equity Futures Lower
19 January, 2015
Traders had some hope that they could take at least a brief nap ahead of the China open before all risk hell broke loose in the latest evening session, however either some liquidating algo or the Iranian oil trading desk had different plans, and moments ago WTI dipped below $28 per barrel, sliding as low as $27.92, doing so only for the first time since 2003, a new 12 year low.
The plunge in the highly correlated asset promptly dragged not only the USDJPY carry pair but also the E-Mini well lower, with ES sliding as low at 1861 moments ago before recouping some of the loses.
And now we turn our attention to the China open, and for the real pandemonium to begin.
Shanghai Opens Below 3,000 As Animal Spirits Leave The Building: Longest Margin Debt Drop In 6 Months
19 January, 2015
Traders who may have napped through the earlier oil slide below $28 finally woke up just in time for the China open to find that while there was little excitement on the currency front following a Yuan fixing, which at 6.5578 was practially unchanged from yesterday's midpoint of 6.5596...
...the Shanghai composite - following yesterday's torrid, manipulated last hour surge - opened 0.5% lower, sliding back below the 3,000 level which was breached last week for the first time since last summer.
More troubling for China's market manipulators is that they will very quickly and aggressively need to get involved today if they wish to prop up the market, now that the animal spirits are officially gone.
Below is a chart of the Chinese stock market "animal spirits" leaving the building.
According to Bloomberg, the outstanding balance of Shanghai margin debt dropped for 13th consecutive day on Tuesday, the longest since July 9. Balance fell 0.1%, or 610m yuan, to 583.4b yuan or the lowest level since October 9. This was the longest losing streak in 6 months as the public now leave the market bubble in droves.
Elsewhere in related securities, while the onshore Yuan is peaceful, there was less peace for its offshore cousin, where the USD/CNH 12-month forwards tumbled following selling by Asia-based leveraged accounts, and trigger stop-losses through the 2,900 area. PBOC intervention time? Perhaps, but it's early.
Also troubling was the Bloomberg note that after the PBOC broke the Hong Kong interbank market by crushing all available FX liquidity in order to manipulate the CNH higher, now the offshore spillover appears to have spilled right back into China as follows:
- CHINA'S OVERNIGHT REPURCHASE RATE JUMPS TO NINE-MONTH HIGH
At this point it is practically impossible to track all the Chinese market breakages, which like connected vessels appear at the most random of places, and the moment one hole is patched up, another immediately takes its place.
Finally, for those interested in the Hong Kong market, the Hang Seng Index slid 1.6% to 19,325.56 at the open, resuming declines after snapping a three-day losing streak yday, with losses led by energy companies such as Sinopec -3.6% and PetroChina -3.3% which were among the biggest drops on HSI.
However perhaps most crucially, the Hong Kong Dollar is systematically collapsing towards the weak-end of its USD-peg band...
And crude is unable to sustain any bounces...