Rabobank: The Key Question Is Why China Decided To Jump-Start Its Stocks Now?Tyler DurdenTue, 07/07/2020 — 10:44
Submitted by Rabobank’s Michael Every
At time of writing the Shanghai stock exchange was up merely 1.8% on the day, quite disappointing after the 5.8% leap yesterday, but still meaning it has gained nearly 14% in just a few of sessions. That’s the best performance since late 2014, just before the same market went on its dizzying 2015 run. The same dizzying run that was overtly and blatantly a state-led bubble: and one that ended in a disastrous crash with all manner of nasty recriminations, including ‘don’t sell!’ off-the-record instructions, and apparent threats of arrest for those short-selling, or even writing negative research reports.
One wonders what the decision-makers at MSCI, who in the total absence of any comprehensive reforms in Chinese stock regulation post-2015 nonetheless decided to increase the country’s global portfolio weighting, are thinking right now. More so with hawkish US politicians already talking about the dangers of US capital being pumped into Chinese markets — and that US rhetoric is not going to get any less hawkish as Hong Kong CEO Carrie Lam introduces sweeping new police powers including warrant-less searches, property seizures, online surveillance, and not allowing people to leave the territory. That as Trump tweeted: “China has caused great damage to the United States and the rest of the world!” yesterday, and as a White House aide stated an executive order on China is apparently imminent.
While this is not an equity-focused, nor specifically China-focused Daily, this scale of market move needs some examination. What is going on? Let’s run through the options quickly:
Is it led by Chinese demand? The data say no. We aren’t even back to the pre-Covid trend, and that would not justify a 14% gain.
Is it led by Chinese supply? Much more likely – but is there any global demand for that supply? Not at the moment, and increasingly less so going forwards if you listen to the talk about shifts in supply chains out of China. So it’s stock-piling or product-dumping ahead, perhaps.
Is it led by lower interest rates? No. There hasn’t been any major easing in China to generate the same lower rates/higher stocks knee-jerk response seen elsewhere. It isn’t able to ease so overtly because it needs to stop capital outflows.
Is it led by QE? No. Yet even though Bloomberg today says China isn’t doing QE, look at a country with a 10 – 12% consolidated fiscal deficit pre-Covid, and perhaps nearer 20% at the moment; ask how it’s being funded (by the PBOC), and how much of that deficit spending flows into infrastructure; and consider that what one sees is quasi-MMT. Which is why China cannot afford to run a current-account deficit without losing control of its quasi-currency peg, or at least needs a net inflow of USD.
Has this been a net-inflow/foreign-capital driven rally? No. This is a domestic story…so far – and one that seems engineered in the hope that it willbecome a foreign-driven rally. In all fairness, it’s not as if other major markets are not seeing blatant ramping from authorities one way or another –Trump uses Twitter to the same effect– or fundamentals-defying trends.
Yet the key question is why China has decided to jump-start its stocksnow? Why, when locals will act accordingly and listen to the authorities when they tell them where they are about to get their “guaranteed” minimum 20% annual return; and they follow that smooth, paved path through the financial jungle;…until it all ends in 2015 chaos again. Moreover, why given bond yields are spiking as a result, which a debt-laden economy cannot afford? Why, as punters walk away from Wealth Management Products, pulling the funding rug out from under the feet of many property projects as a result?
Perhaps to jump-start consumption? Yet property is more widely-held than stocks. Perhaps to stop the property bubble getting out of control? If so, stocks are hardly a less dangerous tiger to ride. Perhaps to swap debt for equity? Except bond yields are rising, which hurts most borrowers more than some can gain through stocks. Perhaps to encourage firms to tap unlimited CNY equity capital and not (soon to be limited?) offshore USD debt? Perhaps to help push CNY back to 7.01 to try to ease some of the looming US political pressure on China in that USD regard? Or, as suggested yesterday, if pressure can’t be eased, perhaps to allow for an immediate signal-sending 2.5% fall in CNY without taking it into a range that would suggest to the world that China is no longer master of its own destiny? (And on USD/CNY it isn’t: not while the US holds the sanctions trump card.) Perhaps simply to try to get those USD capital inflows by hook or by crook to keep the game going: “Look, you can’t miss out on this!”?
One might notice that none of the above analysis involves traditional market metrics. That is because we do not have traditional markets, or metrics, and there is nothing market-based about what is happening in this “market”. The far better form of analysis, as above, is to try to play market ‘Cluedo’ (‘Clue’ in the US). “So was it the stock bull-market in China with the quasi-MMT?” Who did it? Who benefits? And who ends up being done in by the lead pipe?
Meanwhile, the RBA today held rates and its yield curve targets, as fully expected, but underlined that FISCAL and monetary support will be needed for some time. What is another term for fiscal and monetary support? It starts with M and ends in T. And there is another M. The RBA also pledged to scale up its bond buying if needed. This implies the massive increase in the Aussie defence budget just pledged will be de facto covered by the RBA. Throw another submarine on the barbie, mate. The RBA will meanwhile “do whatever it takes” to keep the bond market functional: presumably this just means yields staying low, because the Japanese example clearly shows that if you issue lots of public debt, and the central bank buys it, then the central bank eventually becomes the market; so the RBA is saying it is going to keep itself functional.
3.9 Unemployed Workers For Every Job Opening Despite Record Hiring Surge: JOLTSTyler DurdenTue, 07/07/2020 — 10:30
With the BLS’s JOLTs, or job openings and labor turnover survey, coming in with an extra month delay, we already knew that the May jobs data would be the strongest on record (if only after the catastrophic April loss of 20MM jobs), and sure enough that’s what the BLS confirmed moments ago when it revealed that in May the number of job openings jumped from a revised 4.996 million to 5.397 million, beating the expectation for a continued drop to 4.5 million (after plunging from 6 million to just 5 million in April, a level last seen in 2014).
Job openings rose in accommodation and food services (+196,000), retail trade (+147,000), and construction (+118,000); they declined in information (-55,000), federal government (-37,000), and educational services (-27,000). The number of job openings increased in the South region.
While we already knew that the series of 24 consecutive months in which there were more job openings than unemployed workers ended with a thud in March, in April it was an absolute doozy with 18 million more unemployed workers than there are job openings, the biggest gap on record. In May the gap closed somewhat, with 15.6 million more unemployed than available job openings. As a result, there were about 3.9 unemployed workers for every job opening.
There was a silver lining in the number of hires which after plunging to a decade-low 4 million in April, soared by 1.5 million in May to a record high 6.487MM. Hires increased in a number of industries, with the greatest rise in accommodation and food services (+763,000), followed by health care and social assistance (+479,000), and construction (+427,000).
Additionally, as hires soared in May, separations tumbled from 10 million to just 4.1 million. Of these, the number of layoffs collapsed to just 1.8 million in May from 7.7 million in April, and a record 11.5 million in March.The number of layoffs and discharges decreased in May to 1.8 million (-5,912,000) and 1.4 percent, respectively. The rate, which had reached a series high of 7.6 percent in March, is now much closer to the pre-pandemic rate of 1.2 percent in February. The number of layoffs and discharges decreased for total private to 1.7 million (-5,809,000) and for government to 124,000 (-103,000). The layoffs and discharges level decreased in all but one industry. The largest declines occurred in accommodation and food services (-1,251,000), followed by retail trade (-758,000), and other services (-698,000). Layoffs and discharges increased in federal government (+16,000).
And, with far fewer people getting fired, there was a modest increase in the number of people quitting their jobs, which rose to 2.1 million (+190,000). Quits rose to 2.0 million (+228,000) for total private and fell to 108,000 (-38,000) for government. Quits increased in accommodation and food services (+88,000), durable goods manufacturing (+38,000), and transportation, warehousing, and utilities (+27,000). Quits decreased in state and local government education (-26,000), state and local government, excluding education (-25,000), and educational services (-22,000).
Update (1020ET):We’re almost surprised that NBC News actually let this doctor on, but if you have a minute, Prof. Adam Tooze explains why the policy-making process utilized by western democracies isn’t well-suited to confronting issues like the coronavirus outbreak.
Prof. Adam Tooze on worldwide coronavirus lockdowns: “You could take the view it was one of humanity’s greatest moments, that we were able to do this collectively.“
Update (1000ET): New York Gov Andrew Cuomo’s latest numbers out of NY show mostly more of the same: the number of cases climbed just 0.1%, less than the 7-day average of 0.2%, at a time when the number of new cases have mostly stalled out.
Today’s update on the numbers:
56,736 tests were performed yesterday. 588 tests came back positive (1.04% of total).
New York also added Delaware, Oklahoma and Kansas to its quarantine list, bringing the total number to 19 states in total.
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Update (0935ET):The US may not actually have the “lowest Mortality Rate in the World”, as President Trump contended in a tweet this morning, but as deaths have failed to pick up even as more experts insist that it’s only a matter of time thanks to the inevitable “lag” (nevermind the data showing most of those being sickened are younger and much more likely to survive).
“COVID-19 (China Virus) Death Rate PLUNGES From Peak In U.S.” A Tenfold Decrease In Mortality. The Washington Times @WashTimes Valerie Richardson. We have the lowest Mortality Rate in the World. The Fake News should be reporting these most important of facts, but they don’t!
Update (0900ET):As the GOP tries to prove to the public that they’re taking the coronavirus threat seriously, the party has just announced that it will provide mandatory coronavirus testing at its national convention in Jacksonville next month, Reuters reports.
The plan will require thousands of attendees to get tested for the coronavirus before entering the convention site in Jacksonville. In addition to trying to signal that they’re taking COVID-19 safety more seriously, the party also wants to ensure that Trump speaks to a packed house when he accepts the nomination.
“Everyone attending the convention within the perimeter will be tested and temperature checked each day,” said Erin Isaac, communications director for the host committee, in a memo to reporters.
The convention was originally supposed to take place in North Carolina but was moved to Florida after NC balked. Unfortunately, Florida is now the state that’s reporting the most new cases per day, as local officials take measures into their own hands. The state is reporting roughly 10k new cases per day, which recently pushed Fla’s total above the 200k mark.
Sen. Charles E. Grassley has already said he plans to skip the Republican National Convention in Jacksonville next month “because of the virus situation.” He’s 86 years old.
Meanwhile, ABC News reports that Australia is having issues with its system allowing certain people to cross the closed border between NSW and Victoria. The border is expected to close tomorrow.
45 minutes after launching on Tuesday, the website allowing Aussies to apply for a permit to cross the border apparently stopped working. Although functional when it launched shortly before 7:30pm on Tuesday night local time, by 8:15pm local time, visitors were unable to apply for permission to enter NSW. Melbourne has reported thousands of new cases, accounting for 95% of the country’s new cases over the last few weeks.
Victoria has also been sealed off from the rest of the country, in addition to closing its border with NSW.
In the US, hospitals across the Sun Belt continue to be inundated with coronavirus patients.
As we noted yesterday, Arizona has reached 89% capacity for its ICU beds as of Monday, while Alabama, California, Georgia, North Carolina, South Carolina and Texas also reported unprecedented numbers of hospitalizations. For the 28th day in a row, the country’s rolling seven-day average of daily new cases busted the previous record, although the number of deaths has remained relatively stable, according to the Washington Post.
As more local officials push to make mask-wearing mandatory, a faculty revolt at Georgia Tech and a petition from the campus workers union have pushed the state to allow the university to make mask wearing mandatory in public places on campus.
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As health officials in Beijing reported 8 new foreign cases of the virus and 15 asymptomatic cases on Tuesday afternoon, Australian health officials and officials in the country’s second-most-populous state of Victoria announced that it would re-enter ‘Phase 3′ lockdown, joining a growing list of major cities — Lisbon, Madrid, Beijing — that have reimposed lockdown measures amid a resurgence in COVID-19 cases.
Just yesterday, Victoria (the home of Melbourne and the surrounding suburbs) and neighboring New South Wales (home to Sydney and the country’s most populous state) announced plans to close borders to hard-hit Victoria, the first time in a century that these borders have been closed.
The Aussie sold off when Victoria Premier Daniel Andrews announced the lockdown, likely because the 6 weeks embraced by Andrews was longer than the market expectations of 4.
Cases have been climbing in Australia amid a new outbreak centered in Victoria that officials fear might spread across the country, now that social distancing measures have been largely unwound. Australia reported about 200 new cases on Tuesday, the highest daily total since late March.
As part of the new lockdown measures, more than five million residents of Melbourne will be locked down for six weeks beginning Tuesday. The usual exceptions will apply, and the level of enforcement isn’t yet clear.
Though New South Wales has reported more cases overall, Victoria has been the biggest contributor to the country’s tally of new cases since the resurgence began weeks ago.
As we await the latest round of US data, India has confirmed that its outbreak has topped 700,000 with 22,252 new infections, becoming just the 4th country to surpass that level. That daily number is down from 24,248 the previous day. The country’s COVID-19 tally now stands at 719,665, while its death toll surpassed the 20,000 mark with 467 new deaths; it now stands at exactly 20,160
In Japan, Tokyo once again confirmed 106 new infections, extending a streak of 100+-case days to six. The capital has urged residents of the capital city to be cautious, and avoid nightlife spots.
The big vaccine news on Tuesday was China’s Sinovac Biotech, which will begin Phase III trials of its coronavirus vaccine candidate in Brazil this month. 9,000 health-care professionals will be involved in the study, which will be conducted in partnership with Brazilian vaccine producer Instituto Butantan. Only two other candidates, including AstraZeneca’s experimental vaccine (developed by researchers at the University of Oxford) along and another one developed by China National Pharmaceutical Group — aka Sinopharm — have made it to these late-stage trials already.
8 of the 19 vaccines that have made it to human trials around the world are based in China.
South Korea confirmed 44 new cases on Tuesady, down from 48 a day ago. Total infections reached 13,181 with deaths still at just 285.
In the Middle East, Iran recorded its highest daily number of new COVID-19 deaths with 200 fatalities reported in the past 24 hours. Iran reported 200 new deaths from the coronavirus, the most in a single day since the Middle East’s deadliest outbreak began in February. The previous record was Sunday’s 163 deaths.
“Unfortunately in the past 24 hours we have lost 200 of our compatriots, bringing the total number of victims to 11,931,” health ministry spokeswoman Sima Sadat Lari said on state television.
Another 2,637 people have tested positive for the virus, taking the total official number of cases in Iran to 245,688.
In Africa, South Africa’s confirmed total has surpassed 200,000 as the country continues to post some of the highest daily numbers in the world, as Al Jazeera pointed out.
The health ministry reported 8,971 new cases, bringing the total to 205,721, with nearly 1⁄3rd in the new hot spot of Gauteng province, which includes Johannesburg and Pretoria.
There are more than 477,000 confirmed cases on the African continent.
You can find all the videos on the Bit-Chute platform but may have to search for them. or you can check below to see if youtube found and removed them all (part 1 – 5) if removed in time I will add them back.
“A step‐op is one in which the bad guys keep going, one intrusion after another. It isn’t just West Nile, it’s West Nile, then SARS, then Bird Flu, then Swine Flu. It”s all one package, with the idea, in this case, that they’ll slowly wear down the resistance and people will buy in, will buy the story, the lie. They want people to OBEY. That’s the whole essence of this op. “OBEY.” It isn’t only about fake epidemics and getting vaccines. It’s about operant training in OBEYING. Get it? In general. Obey us. We command, you go along.” ~ Ellis Medavoy in interview with Jon Rappoport, from The Matrix Revealed
WordPress.com suddenly took down his blog after 10 years of continuous operation. There was no warning or advance notice of any kind. JonRappoport has worked as a free-lance investigative reporter for over 30 years.