07Jan2016 Pre-Market Commentary: World Markets Take Big Hit, China Down 7%, US Futures Down 2%, WTI Crude At 2003 Lows, So Far, Just A Correction

Written by Gary

US stock future indexes are sharply down this morning with SPY off two percentage points as the continued slide in the Chinese renminbi. Chinese equities were suspended for the second time this week after tumbling more than 7% in the first half hour of trade and now World Markets are taking a beating.

WTI crude has fallen to November, 2003 levels at 32.10.

Here is the current market situation from CNN Money
	European markets are sharply lower today with shares in Germany off the most. The DAX is down 3.44% while London’s FTSE 100 is off 2.86% and France’s CAC 40 is lower by 2.68%.

What Is Moving the Markets

Here are the headlines moving the markets.
	Stock futures tumble as China allows yuan to fall further (Reuters) – U.S. stock index futures fell sharply on Thursday after China allowed the yuan to fall further and oil prices slid to near 12-year lows, raising concerns over the state of the global economy.
	J.C. Penney same-store sales rise 3.9 percent in November-December (Reuters) – J.C. Penney Co Inc said same-store sales surged during the holiday shopping months of November and December due to strong demand for its private-label offerings and gift products and higher online sales.
	Oil slides below $33 to near 12-year low as China turmoil rattles investors LONDON (Reuters) – Oil fell below $33 a barrel on Thursday for the first time since April 2004 as a fall in Chinese shares rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.
	Yahoo looking to slash 10 percent or more of its workforce: Business Insider (Reuters) – Yahoo Inc is working on a plan to cut its workforce by at least 10 percent and it could start the process as early as this month, Business Insider reported, citing sources.
	China turmoil sends oil, stocks sliding LONDON (Reuters) – Global shares tumbled for a sixth day on Thursday and oil prices slid to levels not seen since the early 2000s, after China guided the yuan lower and Shanghai shares tumbled by 7 percent, igniting fears of competitive devaluations across Asia.
	China lets yuan fall faster, share trading suspended as prices tumble SHANGHAI/LONDON (Reuters) – China allowed the biggest fall in the yuan in five months on Thursday, pressuring regional currencies and sending global stock markets tumbling as investors feared the Asian giant could trigger competitive devaluations from its peers.
	A rebranded Saab at the center of China’s green car push BEIJING (Reuters) – The Swedish automaker once known as Saab has emerged as part of China’s push to make electric vehicles a mass-market alternative to petrol cars, after getting a $12 billion order for EVs.
	Airbus defense asset sale ‘progressing well’: strategy chief PARIS (Reuters) – Airbus Group is making good progress in the sale of its defense electronics activities, a top executive said on Thursday.
	Gold, Bitcoin Soar After China Liquidates Most Reserves On Record To Defend Currency A little over two months ago, when official PBOC data revealed that not only had Chinese reserve outflow slowed down, but actually posted an uptick in October, we warned that “Capital Is Still Flowing Out Of China, Here’s How Beijing Is Hiding It”, in which we explained that in taking a page from the western playbook, the Chinese central bank had shifted to less “traceable” forms of currency manipulation, namely via “forwards”. To wit: Standard central-bank intervention to support a currency generally involves selling dollars and buying the home tender. In this case, China’s large state banks borrowed dollars in the swap market, sold the U.S. currency in the cash spot market and used forward contracts with the central bank to hedge those positions. “If you can intervene without actually diminishing your reserves, it’s somehow viewed as better,” said Steven Englander, global head of Group-of-10 foreign exchange-strategy in New York at Citigroup Inc. Such central-bank activity “may not look quite as dramatic as the sale of reserves, and they may prefer that optically,” he said. Since this form of FX intervention does not impact cash reserves and is not reflected in a change f underlying spot securities, China could intervene for an extended period and not show it, which is precisely what happened in October and November. The problem is that this only works for a limited period of time, and only if the manipulation with synthetic instruments works. In this case it failed miserably as the latest collapse in the Chinese currency has demonstrated. It also means that sooner rather than later, the PBOC would be forced to revert to traditional, cash-based intervention. And then came December.< …
	Frontrunning: January 7 China turmoil sends oil, stocks sliding (Reuters) China’s Stock Traders Go Home After 29 Minutes (BBG) Yuan hits weakest since Feb 2011 on fresh low midpoint (Reuters) Stocks Extend Rout, Oil Slides on China as Soros Warns of Crisis (BBG) China’s 29 Minutes of Chaos: Stunned Brokers and a Race to Sell (BBG) North Korea Uses Bomb Test to Boost Dictatorship (WSJ) Arab Shiites Are Caught in Iranian-Saudi Strife (WSJ) Oil slides below $33 to near 12-year low as China turmoil rattles investors (Reuters) Truck bomb kills 65 at Libyan police training center (Reuters) China Foreign-Exchange Reserves Extend Slump (BBG) Cameron upbeat but poll shows Britons tilting toward leaving EU (Reuters) Europe’s Already Bleak Outlook Shields Bonds From Market Turmoil (
	Global Stocks Crash After Spiraling Chinese Devaluation Unleashes Worldwide Chaos And Selling In yesterday’s overnight market wrap, we commented that while Chinese stocks had succeeded in levitating following another massive government intervention, “the global market was far more focused with what was going on in China’s currency, which as previously reported, plunged to new 5 year lows, while the spread between the onshore and offshore Yuan rose to a record wide, suggesting the depreciation in the currency is only going to accelerate from here, and a big payday for Kyle Bass is coming.” A few hours later this was confirmed when China set the Yuan fixing some 0.5% lower, the biggest drop since the official August devaluation… … and unleashed a global selling panic after China’s stock market was promptly shut down less than 30 minutes into trading, when it hit the -5% “15 minute” circuit breaker, and immediately thereafter the -7% “all day” circuit breaker. This was the second market halt this week, and means that Chinese stocks have been fully halted on half of all trading days so far in 2016, just as we said was the endgame for this massively rigged market back when we described the Hanergy fiasco. The following chart courtesy of Holger Zschaepitz summarizes the utterly farcical nature of Chinese markets quite effectively:
	Stocks Pummeled on China Volatility Steep falls in Chinese equities pummeled global markets, as widening concerns over the world’s No. 2 economy pushed investors out of shares, oil and metals, intensifying markets’ turbulent start to the year.
	Oil Prices Fall to Lows Last Seen Over a Decade Ago Oil prices slid to levels not seen in more than a decade, hammered by continuing market turmoil in China, the world’s second-biggest oil consumer.
	China Markets Closed for Second Time This Week China’s stock market tumbled and scored its shortest trading day in its 25-year history, as Beijing’s growing tolerance of a weaker currency intensified concerns about capital flight and the health of the economy.
	Rail Week Ending 02 January 2016: In Contraction for the Week, Month, and Year Week 52 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic marginally remained in expansion year-over-year, which accounts for approximately half of movements but the weekly railcar counts slipped further into contraction.
	Gauging The Jihadist Movement In 2016: The Islamic State Camp from STRATFOR – this post authored by Scott Stewart Last week’s Security Weekly began our 2016 “Gauging the Jihadist Movement” series with a discussion of the status of the al Qaeda portion of the movement. As in prior years, we are considering jihadist goals along with theories of insurgency and terrorism to measure the status of the various components of the global movement. The jihadist movement’s objectives can be found here, and a discussion of terrorist and insurgent theory here.
	Economic Report: Jobless claims finish 2015 at lowest level since 1973 The number of Americans who applied for new unemployment benefits in 2015 fell to the lowest level in 42 years.
	Slide Show: 5 charts show the face of a market dealing with China, oil panic These charts show just how fast investors are running for the exits as the pain from China and oil shows no sign of letting up.
	Market Snapshot: Dow futures skid 360 points on China halt, oil slide U.S. stock futures plunge again, indicating a tumultuous day ahead on Wall Street as another trading halt for Chinese stocks and sliding oil prices fuel heavy selling.