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phil
May 31st, 2016 at 7:14 am

Good morning!  

Europe down a bit and we're down a bit but it's window-dressing day, so I'm not expecting a big sell-off.  China had a 12.5% flash crash (10% with a 2.5% overshoot) this morning but it reversed in minutes so maybe just a computer thing – very scary though. 

Chinese stock futures flash-crash 12.5%


• Chinese stock futures flash-crashed on extreme volume overnight, marking the second sudden swing to rattle traders this month.
• Contracts on the CSI 300 Index erased three months of gains by plunging over 12.5%at 10:42 a.m. local time, but recovered almost all of the losses within a minute.
• The swing follows a similarly unexplained drop in Hang Seng China Enterprises Index futures on May 16, a move that heightened anxiety among investors facing slower Chinese economic growth and a weakening yuan.
• While sudden price swings are hardly unique to Chinese exchanges, the country’s markets have come under increased scrutiny as MSCI considers adding mainland shares to its international indexes.
• The Shanghai Composite rallied 3.3% today after Goldman Sachs increased the probability that Chinese A-shares will be included in MSCI's indexes to 70%, citing recent measures to curb trading halts and clarify beneficial ownership rules.
• A decision will be announced on June 14.





An Unusual Number Of Known Unknowns" – These Are The Key Event Risks In June

Tuesday's economic calendar


• 8:30 Personal Income and Outlays
• 9:00 S&P Case-Shiller Home Price Index
• 9:45 Chicago PMI
• 10:00 Consumer Confidence
• 10:00 State Street Investor Confidence Index
• 10:30 Dallas Fed Manufacturing Survey
• 3:00 PM Farm Prices

China Sends Yellen Another Warning, Fixes Yuan At Lowest In Over Five years

The Big Short Is Back in Chinese Stocks. Chinese equities are once again in the cross hairs of short sellers.Short interest in one of the largest Hong Kong exchange-traded funds tracking domestic Chinese stocks has surged fivefold this month to its highest level in a year, according to data compiled by Markit and Bloomberg. The last time bearish bets were so elevated, such pessimism proved well-founded as China’s bull market turned into a $5 trillion rout.

China's Slowdown Hits Nearby Economies Hardest. Hong Kong and Mongolia alike are feeling the pinch.Those nearest to China are among the hardest hit as growth in the world's second-largest economy grinds to the slowest pace in a quarter century. Hong Kong, Macau, and Taiwan all saw their economies shrink in the first quarter, while Mongolia's commodities-fueled boom has faltered. And the bad news doesn't stop there. "The ripples are likely to spread further out," said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. "As China's economy continues to cool, it will provide an ongoing drag on global output, curtailing inflation pressures in the process and anchoring interest rates in the process. The economic malaise currently experienced by China's immediate neighbors, therefore, is only a portend of a milder version to afflict economies elsewhere as China comes off the boil." That's already the reality facing Hong Kong.

Beyond The Minsky Moment: China's Ponzi Schemes Are Now Investing In Other Ponzi Schemes

 

Japan's Abe to delay tax hike, order more stimulus


• Is Abenomics working? Finance Minister Taro Aso told Japan's parliament over the weekend that PM Shinzo Abe will propose delaying a sales tax hike, from 8% to 10%, for a second time until October 2019.
• He further plans on proposing a stimulus package in a special legislative session after the July upper house election, where the government will seek a supplementary budget worth ¥5-10T ($45-90B).
• The Nikkei is up 1.4%, while the dollar heads above ¥111 for the first time since late April (underpinned by last week's rate hike comments from Fed Chair Janet Yellen.)
• Reports are also coming through the wire that Abe has decided to forego a snap election.

Japanese factory output improves as Abe mulls tax hike delay


• Japan's factory output remained resilient in April, rising 0.3% from the previous month despite a series of earthquakes in the southern part of the country.
• Household spending fell by a less than expected 0.4% and job availability hit a 24-year high, a relief for Prime Minister Shinzo Abe who is expected to delay a sales tax hike next year to maintain the nation's fragile recovery.
• The better-than-expected data also triggered a brief rebound in the yen that pushed the dollar off its one-month high against the Japanese currency.
• Nikkei +0.9% to 17,229.

 

Factory Output in South Korea Drops Further Amid Weak Exports. South Korea’s industrial production fell more than economists expected as weak exports and corporate restructuring of shipbuilders continue to hurt demand and business sentiment. Factory output dropped 2.8 percent from a year earlier in April, Statistics Korea said Tuesday, compared with a 1.3 percent decline estimated by economists in a Bloomberg survey. Production fell 1.3 percent from a month earlier. "The negative factory output data trend shows that the foundations of growth are weak," said Suh Dae Il, an economist at Mirae Asset Daewoo Co. "The government’s push to restructure shipbuilders and shipping companies will further hurt domestic demand." ?

Fed Outlook Hits Bonds to Emerging-Market Currencies; Oil Climbs. Anxiety over the prospect of a U.S. interest-rate hike as soon as June dominated global trading, battering government debt and most developing-nation currencies. Emerging-market currencies extended losses from Friday, on track for their worst month since August against the dollar after Federal Reserve Chair Janet Yellen signaled Friday that a rate increase is likely some time in the coming months. Gold fell for a ninth day in its longest slump in a year, while Mexican bonds sank with German bunds amid a tumble in 10-year treasury futures. A gauge of global stocks held near a four-week high with trading volumes in the Americas and Europe more than 50 percent below their daily average amid market closures in the U.S. and the U.K. The yen slumped a second day.

Asian Stocks Little Changed as Investors Weigh Data, Rate Hike. Asian stocks were little changed, poised for the biggest monthly drop since January, as investors assessed economic data and the prospects for higher U.S. interest rates.The MSCI Asia Pacific Index rose less than 0.1 percent to 128.28 as of 9:16 a.m. in Tokyo. The gauge is down 2.2 percent this month, the worst showing since an 8 perce

European Stocks Little Changed as Investors Mull U.S. Rate Hike. European stocks were little changed in thin trading as investors considered the implications of a possible increase in U.S. interest rates after Federal Reserve Chair Janet Yellen said a hike is likely in the coming months. The Stoxx Europe 600 Index added 0.1 percent to 350.14 at the close of trading, after briefly rising as much as 0.2 percent, with automakers rising the most.

Eurozone inflation remains negative in May

• Euro area inflation stayed negative in May, according to a flash estimate from Eurostat, edging up to -0.1% from -0.2% the month before.
• The latest figure is a far cry from the 2% inflation target set by the ECB, and comes after the central bank announced further stimulus measures in March in a bid to stimulate the bloc's economy.
• Meanwhile, the eurozone's jobless rate came in flat at 10.2% for April, as unemployment dropped by 63,000.
• Euro -0.1% to $1.1113.

 

Eurozone economic sentiment strengthens in May


• Eurozone economic confidence advanced to a four-month high this month, driven by marked improvements in the retail and construction sectors.
• According to the European Commission, the economic sentiment index rose more-than-expected to 104.7 from a revised 104.0 in April.
• The report comes ahead of this week's ECB meeting in Vienna, where the central bank is expected to keep its ultra-loose policy unchanged after expanding QE to €80B in March and cutting the deposit rate further below zero.
• Euro +0.2% to $1.1139.

Brits "Appalled, Disgusted" At Brexit Postal Ballot 'Fraud'

Former CEO of HSBC: Brexit would make London a 'prosperous global financial centre'

Greece, creditors head back into the boxing ring


• In a letter written to its European and IMF creditors, Greece said it cannot implement some of the extra changes sought in exchange for fresh bailout loans, including banking regulation, sales of bad loans, pension reforms and privatization.
• The disagreement could further delay the disbursement of bailout funds which Athens badly needs to pay off IMF loans in June, bonds of the ECB maturing in July and increasing state arrears.

Iraqi Forces Begin Ground Assault on Fallujah. The city is one of Islamic State’s most significant remaining strongholds in Iraq. Iraqi special forces advanced to the edge of Fallujah on Monday but struggled to enter the city, where Iraqi and U.S. officials said Islamic State extremists were amassing civilians to serve as human shields.

Business Makes Senate Push. U.S. Chamber of Commerce hopes to keep the GOP from losing control of the Senate in November. The country’s biggest business lobby will launch an initiative Tuesday to deploy influential Republicans to raise funds for tight Senate races, hoping to keep the GOP from losing control of the chamber in November.

These 7 data points reveal the sorry state of Americans’ finances

Why Management Is Incentivized To Fabricate Earnings: It's All About non-GAAP Bonuses

The Limits Of Oil's Rebound

Suncor bringing Alberta oil sands back online


• Suncor Energy (NYSE:SU) says it has restarted operations at its base plant and MacKay River sites north of Fort McMurray in Alberta, with initial production expected to begin by the end of this week.
• SU's announcement is the latest sign that Canadian oil sands outages caused by the recent wildfires ‎are slowly coming to an end.
• SU also says the Syncrude oil sands mining consortium is planning a return to operations but provides no firm time line; the company says initial production at its Firebag site began early last week, and construction at its Fort Hills mine continues, with the operation expected to be fully staffed later this week.
• The company says it has moved more than 4K employees and contractors back into the region for its restart efforts and would move 3.5K more in the coming week.

Iata warns of slowdown in air travel. Global demand for air travel may be “shifting down a gear”, according to Iata, the aviation industry’s main trade body, sounding a warning that will send jitters through the sector.