Markets closed down significantly, some of the decline was caused by investors not wanting to be exposed as China will be open on Monday and the U.S. markets closed for the Labor Day holiday. Volume was relatively light today compared to some previous sessions and enough volatility to keep traders happy. Last minute selling brought today's DOW down to -272, the Nasdaq off 1.05% and the $VIX remains above 28.
Todays S&P 500 Chart
WTI oil eased below 46 several times, but could not push past that support and will remain in the low 46's for the time being. This week ended with the U. S. unemployment rate falling to a seven-year low in August, but employers added fewer jobs than forecast complicating the Fed's rate decision.
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GENEVA (Reuters) - Five former Geneva wealth managers have paid "substantial compensation" to settle criminal complaints brought by clients whose assets they had invested with U.S. fraudster Bernard Madoff, the Geneva prosecutor's office said on Friday.
NEW YORK/RICHMOND, Va. (Reuters) - The latest U.S. jobs report was not definitively good or bad enough to help the Federal Reserve decide whether to raise interest rates later this month, leaving the decision hanging on volatility in financial markets over the next couple of weeks.
Things were already bad enough for emerging markets going into August. Persistently low commodity prices, slumping demand from China, depressed global trade, and a "diminutive" septuagenarian waving around a loaded rate hike pistol in the Eccles Building had served to put an enormous amount of pressure on the world's emerging economies.
And then, the unthinkable happened.
No longer able to watch from the sidelines as the export-driven economy continued to buckle from the pain of the dollar peg, China devalued the yuan. What happened next was nothing short of a bloodbath. The carnage is documented below.
First note that just moments after the PBoC's yuan move we said the following:
Biggest immediate loser from China's devaluation: Brazil
â€" zerohedge (@zerohedge) August 11, 2015
Well sure enough, with the exception of the kwacha, the Belarusian ruble, and the tenge (which went to a free float overnight late last month), that has proven to be demonstrably correct as you can see from the following overview of EM FX performance since China's deval:
And here's the big picture which also shows that EM FX has fallen 16 of the last 18 weeks with this week being the worst stretch since March:
ANKARA (Reuters) - World financial leaders will agree to calibrate and communicate monetary policy carefully to avoid triggering capital flight, but will not call an expected U.S. rate rise a risk to growth, a draft communique showed on Friday.
(Reuters) - U.S. stock indexes dropped almost 2 percent on Friday as a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.
The most important piece of news announced today was also, as usually happens, the most underreported: it had nothing to do with US jobs, with the Fed's hiking intentions, with China, or even the ongoing "1998-style" carnage in emerging markets. Instead, it was the admission by ECB governing council member Ewald Nowotny that what we said about the ECB hitting a supply brick wall, was right. Specifically, earlier today Bloomberg quoted the Austrian central banker that the ECB asset-backed securities purchasing program "hasn't been as successful as we'd hoped."
Why? "It's simply because they are running out. There are simply too few of these structured products out there."
So six months later, the ECB begrudgingly admitted what we said in March 2015, in "A Complete Preview Of Qâ‚¬ â€" And Why It Will Fail", was correct. Namely this:
... the ECB is monetizing over half of gross issuance (and more than twice net issuance) and a cool 12% of eurozone GDP. The latter figure there could easily rise if GDP contracts and Qâ‚¬ is expanded, a scenario which should certainly not be ruled out given Europe's fragile economic situation and expectations for the ECB to remain accommodative for the foreseeable future. In fact, the market is already talking about the likelihood that the program will be expanded/extended.
... while we hate to beat a dead horse, the sheer lunacy of a bond buying program that is only constrained by the fact that there simply aren't enough bonds to buy, cannot possibly be overstated.
Among the program's many inherent absurdities are the glaring disparity between the size of the program a ...
Early last month in "Cash-Strapped Saudi Arabia Hopes To Continue War Against Shale With Fed's Blessing," we noted the irony inherent in the fact that Saudi Arabia, whose effort to bankrupt the US shale space has blown a giant hole in the country's fiscal account, was set to tap the debt market in an effort to offset a painful petrodollar reserve burn.
"Saudi Arabia is returning to the bond market with a plan to raise $27bn by the end of the year, in the starkest sign yet of the strain lower oil prices are putting on the finances of the world's largest oil exporter," FT reported at the time.
The reason this is so ironic is that at various times, we've characterized persistently low crude prices as essentially a battle between the Fed and the Saudis. Many struggling US producers would likely have been out of business months ago were it not for the fact that ZIRP has kept capital markets wide open, allowing otherwise insolvent drillers to stay afloat. Obviously, that works at cross purposes with Riyadh's efforts to "preserve market share", and so ultimately, the Saudis are betting their FX reserves can outlast ZIRP.
There are other factors at play here that weigh on Saudi Arabia's financial situation including two proxy wars and the defense of the riyal peg which is why turning to the bond market is an attractive option especially considering that capital markets are so favorable thanks to - and here's the irony - the very same Fed policies that are keeping US shale producers in business.
But Saudi Arabia's "war" with the US shale space isn't unfolding in a vacuum and now Qatar is looking to borrow to alle ...
TORONTO (Reuters) - Canada's BlackBerry Ltd said on Friday it will buy rival mobile software provider Good Technology Corp for $425 million, to boost its ability to help corporate clients manage smartphones running on different operating systems.
The characteristic feeling of the post-2008 world has been one of anxiety. Occasionally, that anxiety breaks out into fear as it did in the last two weeks when stock markets around the world swooned and middle class and wealthy investors had a sudden visitation from Pan, the god from whose name we get the word "panic." Pan's appearance is yet another reminder that the relative stability of the globe from the end of World War II right up until 2008 is over. We are in uncharted waters.
Here is the crux of the matter as expressed in a piece which I wrote last year:
The relentless, if zigzag, rise in financial markets for the past 150 years has been sustained by cheap fossil fuels and a benign climate. We cannot count on either from here on out....
Another thing we cannot necessarily count on is the remarkable geopolitical stability that the world experienced for two long stretches during the fossil fuel age. The first one lasted from the end of the Napoleonic Wars in 1815 to the beginning of World War I in 1914 (interrupted only by the brief Franco-Prussian War). The second lasted from the end of World War II in 1945 until now.
Following the withdrawal of U.S. military forces from Iraq, the Middle East has experienced increasing chaos devolving into a civil war in Syria; the rapid success of forces calling themselves the Islamic State of Iraq and Syria which are busily reshaping the borde ...
BOSTON (Reuters) - The top securities regulator of Massachusetts said on Friday he is investigating the computer glitch at BNY Mellon Corp that last month disrupted pricing on more than $400 billion worth of mutual fund and exchange-traded fund assets.
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