China will not support stocks as Fed hawks spook risk

by Chris Becker

Its been a dour Monday morning so far on the markets, with the AUD falling, S&P500 futures off 1% in reaction to two risk-off pieces of news coming out this weekend. This is not just early Monday morning illiquidity talking – something is spooking risk.

First, everyone is talking about this cover page on the FT, with the news that China is ditching its “at all costs” program to save its internal stock market bubble through large purchases and is instead going after the villains:

ft-front-page-31-august-2015

 

Although the Shanghai Composite has risen 10% in the last two sessions, it is by no means out of the woods yet, as I showed in my Macro Morning (Trading Week) roundup this morning:

ssec_ix_price_weekly.11apr13_to_12oct15

This is a market on its last legs, and no support from central banks or authorities means it will revisit its previous low.

To add to the uncertainty, over the weekend, the central bank talkfest at Jackson Hole Wyoming included a stunning return to the hawks talking up interest rate hikes, namely Fed vice chair Stanley Fischer.

Interest rate futures are now giving a 38% chance of a rate hike in September, up from well below 30% mark we saw earlier last week. Even if September is off the table, December is now firming in the the market’s eyes as most likely.

As Chris Weston at IG remarked to me this morning:

 Markets want closure, certainty and stability and weekend news has done the opposite.

Comments

  1. Josh MoorreesMEMBER

    I thought the chinese came out saying they were going to support the market until after the WWII parade this week. Plus they have earmarked all those pension funds (admittedly only 100 billion US) so maybe it is more about propping it up with other peoples money?

  2. markets are so amusing aren’t they……..25 bp up is gonna do anything???? And it could be 12 months or ever before they raise again and the markets are swooning….wat a pack of tools

  3. Lies You Will Hear As The Economic Collapse Progresses – — – – -(also at Zero Hedge)
    http://www.alt-market.com/articles/2678-lies-you-will-hear-as-the-economic-collapse-progresses
    Snip:
    Irving Fisher, leading U.S. economist, The New York Times, Sept. 5, 1929: “There may be a recession in stock prices, but not anything in the nature of a crash.” And on 17, 1929: “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

    It’s The US Dollar, Stupid! http://www.gold-eagle.com/article/it%E2%80%99s-us-dollar-stupid

  4. So, who’s going to come out victorious between the US economy marching on to recovery and the continual shit coming out of China? It’s going to come down to which one exhibits the greatest extremities.