China is slowly learning.
On a day when market participants will care about only one thing – how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) – Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese “plunge-protection” mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet, something which the Fed and Citadel have shown is the most efficient way of “setting” market expectations and getting the most bang for your manipulating buck.
As a reminder, “banging the close” is illegal if it sends the price lower. When it pushes prices higher, it is perfectly accetable.
What was the reason for this latest blatant intervention when according to SCMP's George Chen, about 400 stocks hit 10% daily limit today, “mostly in last 30 mins of trading.” Alas nobody knows such answers in centrally planned markets: “No clear reason to explain why the magical bullish last 30mins trading happened; Rumors say Gov is keen to push index back above 4000 points.” Chen further adds that “many local analysts now believe 3600 points is so-called “policy bottom”. Below that Gov feels like losing face. Next target is 4000 points.”
In other words, after 2 epic crashes in just one month, China is hoping the retail traders will forgive and forget how they lost everything (and more), and just keep putting their hard earned money into a rigged casino. China just may get it.
Other Asian markets traded mostly higher taking the impetus from a positive Wall Street close , as participants focused on upbeat corporate earnings. ASX 200 (+0.9%) outperformed amid gains in miners, following a rebound in commodities. The Hang Seng and Shanghai Comp traded between gains and losses as officials stepped up measures to calm markets, after Chinese press suggested that the government injected USD 100bn in its sovereign fund in order to buy assets abroad. Elsewhere, Nikkei 225 (-0.2%) was the sessions laggard underpinned by index heavyweight Fanuc (-11%) after the Co. lowered its FY profit guidance by 1 7%.
Stocks in Europe failed to hold onto best levels of the session and heading into the North American open are seen mixed, as market participants positioned for the upcoming FOMC release. Gains were led by the health care sector, following earnings by Bayer (+3.9%), with telecommunications sector also performing well following earnings by the likes of KPN (+3.6%) and Telefonica Deutschland (+2.9%).
In spite of the looming risk events, the absence of tier-1 data releases in Europe this morning translated into a somewhat muted price action by fixed income products, while peripheral bond yield spreads tightened, albeit marginally.
Heading into the North American open, EUR/USD and GBP/USD trades marginally higher, with the USD index little changed as market participants sit on the side-lines ahead of the key risk events. In terms of price action overnight, NZD was the session's biggest mover after RBNZ Governor Wheeler reiterated that further easing is likely and additional NZD depreciation is necessary. However, NZD/USD found support after Wheeler stated that the economy is not weak enough to warrant large cuts in the OCR.
The release of the latest API oil inventories yesterday (-1.9mln vs. Prey. +2.3nnln) failed to boost WTI prices, as expectations for the DOE data due out later today still remain for a build in crude, cushing OK, gasoline and distillate inventories. ING has decreased it Q3 brent crude forecast by USD 10 to USD 60 per bbl from USD 70 per bbl citing oversupply, Co. also cuts its Q4 forecast by USD 5 from USD 80 per bbl to USD 70 per bbl. (BBG/RTRS) Turkish energy minister says the Iraq-Turkey oil pipeline which was closed because of an attack is due to be reopened on Sunday. (RTRS)
Today in the US the key report is pending home sales data from the always entertaining NAR, before the FOMC statement this afternoon. On the earnings front Facebook, Goodyear and Metlife are the notable reporters.
