After a lukewarm start by the Chinese “market”, which had dropped for the past 6 out of 7 days despite ever escalating measures by Beijing to manipulate stocks higher, finally the Shanghai Composite reacted favorably to Chinese micromanagement of stock prices and closed 3.7% higher as Chinese regulators stepped up their latest measures by adjusting rules on short-selling in order to reduce trading frequency and price volatility, resulting in several large brokerages suspending short sell operations. At this pace only buy orders will soon be legal which just may send the farce of what was once a “market” limit up.
Elsewhere in Asia, equities traded mixed following a lackluster Wall Street close amid further declines in commodity prices, after Brent crude dropped below $50/bbl for the first time since January, only to rebound in overnight trade. ASX 200 (+0.3%) traded in the green with gains in financials offsetting losses seen in commodity names. Elsewhere, the Nikkei 225 closed lower by 0.1% while JGBs rose following the latest 10-yr auction which drew highest b/c since Jan with 10-yr yields at a 9-week low.
Speaking of “buy only” trading, Greece may want to consider that soon because on the second day after reopening its market for trading, Greek banks traded limit down for the second day in a row. End result: banks such as Piraeus is now down over 50% in two days.
This is Piraeus Bank -51% in two days… We need a name for this chart. pic.twitter.com/x05r9omPEN
— Jonathan Ferro (@FerroTV) August 4, 2015
The reason: the same one we explained in “Greek Banks Just Became A “Strong Sell” At Any Price” – a recapitalization and an equity wipe out are now virtually assured, In fact, judging by the amount of jawboning against it, as seen by these headlines that hit the BBG tape moments ago…
… a bail in of depositors is also practically assured. Only this time anyone who puts their money in the bank really has nobody but themselves to blame.
Elsewhere, the energy sector continues to underperform despite the complex seeing a mild turnaround with Brent and VVTI Sep'15 futures both in the green, with the former retaking $50.00 handle. The European morning has seen Brent Crude pare some of its recent losses to rise above $50 heading into the NYMEX pit open, with WTI following suit and also residing in firm positive territory on the session . The metals complex have also seen a modest bout of strength during European hours, with gold trading higher by around $5.00 at USD 1090, while platinum and palladium are both off their multi year lows, with platinum earlier reaching its lowest level since 2009 and Palladium reaching its lowest level since 2012.
Brent oil, which has slumped more than 20 percent over the last month, was up almost 1 percent. Copper seen as a bellwether of global growth, nudged off a six-year low.
The dollar also helped relieve the pressure, with it pegged back by another bout of weak U.S. data on Monday. Raw material reliant Canadian and Australian dollars both got lifts, alongside Russia's rouble and other emerging FX.
The Aussie dollar was by far the biggest mover. It rose 1.25 percent to an almost two-week high of $0.7375 after a major change in tone from its central bank that suggested it was now more satisfied with the currency level. “You have had a key shift from the RBA that they don't need to intervene as strongly, so that has triggered a considerable Aussie bounce,” said John Hardy, head of FX strategy at Saxo Bank.
“And the (U.S.) dollar view is just flat and we are just waiting for payrolls on Friday. We have had a relatively hawkish set-up from Yellen and co (that interest rates may go up next month) but the rates market just doesn't believe it.”
European Equities reside in mixed territory (Euro Stoxx: -0.3%) heading into the North American crossover, with financials the worst performing sector after Credit Agricole (-9.5%) reported earnings pre-market and announced that they are delaying structural reforms.
Bunds reside in positive territory albeit off their best levels, gaining amid the weakness in equities, while the German curve has flattened in line with the post FOMC trend, following the trend set in USTs. While also of note, the ECB announced further QE details yesterday, which showed extending maturities in German debt. Bunds also took out yesterday's highs to reach their highest level since May 29th before paring some of these gains amid profit taking with macro news flow fairly light, while the UK 30Y also reached 2.5%, its highest level since April before the weak UK Auction (b/c 1.37, Prey. 1.54, tail 0.4bps, Prey. 0.2bps) saw a weakness in UK fixed income products.
