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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (17544)	1/7/2016 12:27:54 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

LOL... I did not realize that you posted the China rout ...... great minds think alike -g- Chinese exchange traders were sent home after 29 minutes of the day gone by. The sharp depreciation in the yuan in recent weeks should—in theory—help Chinese exporters that were hit hard last year by the strong Chinese currency. A stronger currency tends to make goods more expensive in overseas markets. Since Aug. 11, the yuan has depreciated 6.1% against the U.S. dollar. But China’s actions now have such enormous global spillover effects, which could blunt any benefits, analysts and exporters said. In the business world, Chinese exporters say their *overseas customers quickly demand discounts in line with currency depreciation moves, which negates much of the benefit that they would otherwise receive. The same thing tends to happen in global currency markets as other nations depreciate their currencies in tandem with the yuan to maintain competitive position. “There certainly is a huge risk of currency wars breaking out,”* Mr. Barron said. --------- ........ Markets have reacted violently this week to glimpses of what’s happening in the world’s second-largest economy through the lens of manufacturing and services surveys, moves in its local-investor dominated stock market, and onshore and offshore foreign exchange markets. China’s official gross domestic product growth figures have long drawn skepticism, **so investors have looked to alternative constructions meant to approximate the rate. One such indicator is the Keqiang Index. It’s based on Chinese Premier Li Keqiang’s contention in a leaked diplomatic cable, when he was party secretary of Liaoning, that official GDP figures were overstated. He said it was more reliable to track three indicators: railway cargo volume, electricity consumption and loans disbursed by banks. Compiled into an index, those sectors showed an annual growth rate of 2.38% at the end of November*, Mr. Marber said, compared with official GDP figures of 6.9% in the third quarter of last year. Still, the three alternative indicators largely reflect the manufacturing component of the economy, which means the index doesn’t reflect China’s increasingly important service sector, he said. The service sector doesn’t tend to affect such “proxy” indicators as the freight industry, commodity prices, or imports, which makes it more difficult to triangulate the size of that part of the economy, according to Nikolaj Schmidt, chief international economist at T. Rowe Price Group. On top of that, there are already fewer official indicators of services than manufacturing. “What do we really know about the Chinese service industry? You need to have some boots on the ground to get a better feel for it,” Mr. Schmidt said. This lack of data will challenge investors to answer a key question: amid a slowdown in China’s manufacturing sector, which helped spur a boom in commodities and boosted global growth, how much will the service-based economy even matter for other nations’ economic prospects? Growth in China’s service sector may not provide much support for prices of commodities and related financial assets.* China’s central bank has been guiding the yuan lower in the mainland Chinese market as the economy’s acceleration slows. *The fall in the currency, which hit a new five-year low on Wednesday*, is causing growing trepidation among investors of all stripes. “We have been surprised by the currency weakness in the last few days, and that’s an important part of why the market has been so uncertain,” said Amer Bisat, a portfolio manager in New York with BlackRock. JP

To: The Ox who wrote (17544)	1/9/2016 11:59:03 AM
From: John Pitera	1 Recommendation Recommended By 3bar Read Replies (1) \| Respond to of 33421

The End of the Monetary Illusion Magnifies Shocks for Markets........... by Simon Kennedy 1 Central banks no longer have as much room to deliver stimulus 2 HSBC says *currencies most sensitive to policy in 15 years* Central bankers *are no longer the circuit breakers for financial markets. Monetary-policy makers, market saviors the past decade through the promise of interest-rate reductions or asset purchases, now lack the space to cut further* -- if at all -- or buy more. Even those willing to intensify their efforts increasingly doubt the potency of such policies. That’s leaving investors having to cope alone with shocks such as this week’s rout in China or when economic data disappoint, magnifying the impact of such events. “*The monetary illusion is drawing to a close,” said Didier Saint Georges, a member of the investment committee at Carmignac Gestion SA, an asset-management company. “With central banks becoming increasingly restricted in their stimulus policies, 2016 is likely to be the year when the markets awaken to economic reality.”* Even against the backdrop of this week’s market losses, Federal Reserve officials signaled their intention to keep raising interest rates this year. Those at the European Central Bank and Bank of Japan ended last year playing down suggestions they will ultimately need to intensify economic-aid programs. They have only themselves to blame for becoming agents of volatility, according to Christopher Walen, senior managing director at Kroll Bond Rating Agency Inc. He told Bloomberg Television this week that officials’ willingness to keep interest rates near zero and repeatedly buy bonds and other assets meant they became “way too involved in the global economy” and should have left more of the lifting work to governments. The handover to looser fiscal policy now needs to happen if economic growth and inflation are to get the spur they need, said Martin Malone, global macro policy strategist at London-based brokerage Mint Partners. “*Major economies have exhausted monetary and foreign-exchange policies,”* he said. “Government action must take over from central-bank policies, triggering more confident private-sector investment and spending.” The influence of central bankers was underscored by a report this week from currency strategists at HSBC Holdings Plc, which calculated foreign-exchange markets are more sensitive to interest-rate decision-making than at *any time in the last 15 years. “FX markets are likely to remain hypersensitive to rate expectations* until we are past the current era of extremely accommodative monetary policy,” the strategists led by David Bloom wrote. Even if more stimulus does end up being delivered by the ECB or BOJ, China’s increased willingness to devalue the yuan will blunt the effect of it by limiting declines in their currencies and pushing up bond yields as money exits China, according to George Saravelos, a strategist at Deutsche Bank AG in London. “All of these natural market forces that have been suppressed and overwhelmed by money printing by developed-market central banks *will likely assert themselves this year,” said Stephen Jen, founder of London-based hedge fund SLJ Macro Partners LLP. “My guess is that this will not be a tranquil year*.” bloomberg.com