HAPPY “CHINESE” NEW YEAR

Happy New Year: Global Stocks Crash After China Is Halted Limit Down In Worst Start To Year In History

Submitted by Tyler Durden on 01/04/2016 06:46 -0500

It all started off relatively well: oil and US equity futures were buoyant on hopes Iran and Saudi Arabia would break out in a bloody conflict any minute boosting the net worth of shareholders of the military industrial complex, and then, out of nowhere, like a depressed China in a bull shop, the “mainland” crashed the party following a terrible manufacturing PMI report, which sent Chinese stocks sliding slowly at first, then very fast.

So fast, in fact that as we reported last night, on the very first day China’s new circuit breaker mechanism became operational, it was promptly tested out and led to a marketwide trading halt at 1:34pm local after the Shanghai Composite crashed by the 7% limit. Earlier trading was halted for 15 minutes after the CSI Index – which comprises large capitalization companies listed in Shanghai and Shenzhen – dropped 5 percent. This was the worst start of trading in Chinese stock market in history, and oddly enough, was something that not a single pundit predicted as part of their oh so very entertaining year-end forecasts.

And just in case crashing stock markets was not enough, the Chinese Yuan likewise crashed by over 0.6%, sliding north of 6.5325 at 4:50 local time after trading hours were extended and when the traditional PBOC intervention to calm the selloff did not appear in late day trading. The USDCNH was up to a whopping 6.6272 as China’s devaluation accelerates with every passing day.

Slammed by the risk off sentiment, the main global carry trade currency, the Japanese yen, rose against all 31 of its major peers as investors sought the safest assets after China factory data highlighted weakness in the world’s second-largest economy.

As a result of the Chinese collapse on day one, global equities dropped after the Chinese market fireworks, as well as geopolitical fears after Saudi Arabia severed ties with Iran, spurring a flight to haven assets. The MSCI Asia Pacific Index sank as much as 2.2 percent, the most since Sept.29. The Stoxx Europe 600 Index fell as much as 2.8 percent after gaining 7 percent in 2015. Last year the MSCI All Country World Index fell for the first year in four.

“It’s a nasty start for the year,” Peter Kinsella, a senior currency strategist at Commerzbank AG in London, tolf Bloomberg. “It might be the New Year, but old problems remain. Chinese growth concerns have not gone away.”

And then the Developing Nations were also routed: as Bloomberg points out, the slump in DMs harks back to financial turmoil in August that was fueled by China’s devaluation of the yuan. It shows the pace of growth in the world’s second-largest economy will remain key for markets in 2016 after a slowdown last year dragged emerging markets lower and sparked a slump in commodities prices.

So as we start the new year, Dow futures are down 300 points, the E-mini is down 34 points and just barely holding on to 2000, Asia is tumbling, Europe is crashing, and gold is up. At least oil is so far green but just barely, up 1.5% at last check.

S&P 500 futures down 1.6% to 2007
Stoxx 600 down 2.4% to 357
FTSE 100 down 2.1% to 6109
DAX down 3.5% to 10362
German 10Yr yield down 5bps to 0.58%
Italian 10Yr yield down 5bps to 1.55%
Spanish 10Yr yield down 6bps to 1.72%
MSCI Asia Pacific down 2.1% to 129
Nikkei 225 down 3.1% to 18451
Hang Seng down 2.7% to 21327
Shanghai Composite down 6.9% to 3296
S&P/ASX 200 down 0.5% to 5270
US 10-yr yield down 5bps to 2.22%
Dollar Index down 0.55% to 98.14
WTI Crude futures up 1% to $37.40
Brent Futures up 1.6% to $37.88
Gold spot up 1.2% to $1,074
Silver spot up 1.3% to $13.99

In short, Happy New Year from the Federal Reserve, which is hiking because the “economy is strong”!