Monday 11 January 2016

The stock market

Wall Street has worst start to year ever

8 January, 2016

U.S. stocks closed lower on Friday, ending a volatile week with their worst five-day start to a year ever, as sliding oil prices and lingering worries about the global economy offset upbeat U.S. job growth.

Both the Dow and S&P 500 had their worst five-day starts in history, with the Dow falling 6.2 percent for the week and S&P 500 sliding 6 percent. The Nasdaq was down 7.3 percent this week.

All three indexes saw losses accelerating into the close.

The market had opened higher after data showing U.S. nonfarm payrolls surged in December and the unemployment rate held steady. But that was not enough to keep stocks in positive territory.

Oil prices fell for a fifth day and Brent lost 10 percent for the week, while the S&P energy sector .SPNY also extended this week's slide, ending the day down 1.3 percent.

Fears of a slowdown in China and the global economy spooked investors this week, creating a turbulent start to the trading year.

"The start of the year is very poor, so that's got investors on the defensive," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"In the face of weakening global growth ... it's difficult to find reasons to commit money at this point even if one is bullish," he said, adding that he expects stocks to rebound from these oversold conditions next week.

The Dow Jones industrial average .DJI was down 167.65 points, or 1.02 percent, to 16,346.45, the S&P 500 .SPX lost 21.06 points, or 1.08 percent, to 1,922.03 and the Nasdaq Composite .IXIC dropped 45.80 points, or 0.98 percent, to 4,643.63.

The CBOE Volatility Index .VIX ended up 8.1 percent Friday at 27.01, its highest close since Sept. 28.

All 10 S&P 500 sectors ended with declines.

Gap (GPS.N) sank 14.3 percent to $22.91 after the apparel retailer reported a larger-than-expected drop in December same-store sales, while Container Store (TCS.N) slumped 41.2 percent to $4.22, a day after storage products retailer's fourth-quarter profit forecast missed estimates.

Apple (AAPL.O) shares, however, snapped their three-day losing streak and were up 0.5 percent at $96.96.

Volume was again heavy. About 8.9 billion shares changed hands on U.S. exchanges, well above the 7.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.

NYSE declining issues outnumbered advancing ones 2,092 to 980, for a 2.13-to-1 ratio on the downside; on the Nasdaq, 2,018 issues fell and 812 advanced for a 2.49-to-1 ratio favoring decliners.

The S&P 500 posted one new 52-week high and 93 new lows; the Nasdaq recorded 13 new highs and 312 new lows.

Gerald Celente - Trends In The News - "As Predicted: The Panic Of 2016" – (1/7/16)

"As predicted August 6th, 2015 “The Panic Of 2016” has arrived, despite equities down gold prices have risen & “the civilian death toll in the Saudi war in Yemen continues to escalate with more than double the number killed in December than November”.

China Contagion Spills Over To Hong Kong Banks As HIBOR Explodes To Record High, Stocks Tumble

Zero Hedge,

10 January, 2015

Chinese stocks are trading at the lows of the day after Overnight HIBOR rates (Hong Kong's interbank borrowing rate) exploded a stunning 939bps to a record high 13.4%. It is clear that banks are utterly desperate for liquidity and/or are extremely concerned about one another's counterparty risk. This has dragged HSCEI down 5% (to its lowest since Oct 2011).

Something just snapped...

Evidently the pressure between On- and Off-shore Yuan was too much for banks to bear...

Smashing Hang Seng China Enterprise Index down 5% to its lowest since October 2011

But US equities are being bid by an invisible hand once China closed for lunch...

Chinese Default/Devaluation risk just jumpe dback above 120bps (highest since August collapse)

As we explained earlier, as Asian markets opened (ahead of the Yuan fix), they were in turmoil with FX markets crashing (JPY rallying as carry trades unwound), equity markets tumbling (Dow, Nikkei, and China A50), commodity carnage (crude and copper carnage) as Gold and bonds were bid. With offshore Yuan sliding ahead of the fix (and Onshore Yuan 3 handles cheap to Friday's fix), CFETS RMB Index dropping below 100 for the first time, and following Friday's 'token' stability, The PBOC decided to hold Yuan Fix practically unchanged for the second day. USDJPY and equity markets jumped on the news, then quickly faded.

We have seen this "stability" before...

Asian stocks collapse to lowest since October 2011...

Chinese media is pushing rumors of rate cuts and urging people that they do not need USD (despite the lines we noted earlier) demanding theyhave more patience... (via People's Daily)

More patience is needed for the Chinese economy which is in a transition period, as it transfers from old to new economic growth drivers while also facing a backdrop of a slowing global economy, the People's Daily reports citing academics. It would be too opinionated to judge that the Chinese economy would suffer a hard landing based on short-term fluctuations as many factors have had an impact on the yuan's recent depreciation and the stock market's falls.

"The fundamentals of many economic crises is the psychological panic problem, and we need to take good care of the market and foster new drivers; conclusions on the Chinese economy can't be made in a rush based on the short-term or partial changes," said Zhang Tiegang, professor at the Central University of Finance and Economics.

Yeah - all psychological.

Offshore Yuan was tumbling before the Fix...

As were Chinese stocks:

*FTSE CHINA A50 JANUARY FUTURES SLIDE 3%

Of course, The Keynesian have a solution for all this...

*STIGLITZ: RECENT CHINA MARKET VOLATILITY ISN'T CATACLYSMIC
*STIGLITZ: CHINA NEEDS DEMAND BOOST TO AVOID DEEPER DOWNTURN

It's that simple eh?!

The reaction to PBOC "stability" is not good:

*MSCI ASIA PACIFIC EX-JAPAN INDEX DROPS 1.7%, EXTENDING LOSS
*CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 1.7% TO 3,131.85

And Dow futures jumped 80 point and then dumped 100...

Chinese stocks are tumbling...

And ChiNext is now down over 21% YTD...

* * *

As we detailed earlier, markets were turmoiling into the China Fix...

China ripples may be turning into tsunamis. As FX markets creep open, something serious must have snapped. The South African Rand just crashed 10% - the biggest single-day drop since Lehman - to new record lows. At the same time, carry trades are being unwound en masse, smashing USDJPY down to 116.75 (strongest Yen in a year). Somebody do something!!!

The South African Rand crashed 10% to a record low against the USD of 17.9169. This 10% collapse is the largest on record outside of the immediate post-Lehman move...