Turmoiling Markets Pump-n-Dump After PBOC Holds Yuan Flat For 2nd Day, Says Crisis Is "Psychological Panic", Not Fundamental
As Asian markets opened (ahead of the Yuan fix), they were in turmoilwith 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...
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?!
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...
Don't forget - As goes the South African Rand, so goes The World?
Korean Won plunges to its lowest since July 2010...
And Yen is surging...
Smashing Nikkei futures down over 500 points from Japan's close....
As USDJPY tumbles so US Equity markets are slumping...
And crude is carnaging...
Copper flash-crashed at the open and is now retesting...
It appears people were expecting some Chinese intervention over the weekend... and so far have been disappointed.
For now, Gold is bid as a safe haven...
Charts: Bloomberg
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