While some were wondering if last night’s sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round “tractor beam” number would provide a floor under the market . Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
And speaking of pouring cold water on easing plans, the ECB did just that, when several of its governing council members, but most notably Ignazio Visco, said that the ECB may not do further easing after all because it had managed to punk the market once again, and the EURUSD is low enough to where the whole point of QE is now moot. In other words, the market once again discounted action by the ECB… which now will never come. It remains to be seen if the central bank FX traders (which as we now know are openly trading via the CME) will allow the EURUSD to return to its pre “discounting” levels as the ECB returns to full “jawbone Off” mode.
European, Asian stocks fall with oil, metals after China declines to make policy changes in response to slower growth. Miners among largest underperformers, iron ore prices lower. U. S. equity index futures decline. Yields on 10-year U. K. gilts, German bunds fall. Tesco leads FTSE 100 declines after saying it overstated 1H profit by GBP250m.
This post was published at Zero Hedge on 09/22/2014.