Backdoc: WITH ALL THE EXTERNAL FORCES HITTING THE EURO, AND MARKETS AROUND THE WORLD, IT SEEMS WE ARE RIPE FOR SOME TYPE OF GLOBAL CRISIS THAT WILL LIKELY HAPPEN VERY SOON!
I REALLY THINK THIS COULD BE THE WINDOW WHERE A CRASH, FOLLOWED BY AN EMERGING COUNTRY CURRENCIES RESCUE FOR THE WORLD!
WITH LAWS COMING TO CONCLUSION IN IRAQ AND IMPLEMENTATION IS ABOUT BEGIN, WE SHOULD BE VERY HOPEFUL! VERY INTERESTING TO SEE IRAQ'S BUDGET FINALLY COMING UP FOR AIR! SOON THAT NEW FRESH AIR SHOULD BE BLOWN AROUND THE WORLD.
CREDIT DEFAULTS ARE LOOMING AS THE CURRENT SITUATION WORSENS!
LET'S HOPE THEY DON'T LET A GOOD CRISIS GO TO WASTE! HEE HEE DOC IMO
Thunderhawk: Backdoc Alert
Is EM turmoil the third wave of the financial crisis? Goldman thinks so
Emerging markets aren't just suffering through another market rout—it's a third wave of the global financial crisis, Goldman Sachs said.
"Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis," Goldman said in a note dated last week.
The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent's sovereign debt, the bank said.
Concerns that the U.S. Federal Reserve would raise interest rates for the first time in nine years spurred a massive outflow of funds from emerging markets, including Asia's, recently. But the Fed meeting on September 16-17 surprised markets by leaving rates unchanged and many analysts moved their forecasts for the next hike back into next year.
That's helped to stabilize hard-hit markets and currencies, but some analysts expect that's just a temporary reprieve.
One of the reasons Goldman is concerned about emerging markets is that lower interest rates globally have fueled credit growth and a debt buildup, especially in China, and that's likely to impede future economic growth.
Goldman noted that downgrades for emerging market economic and earnings outlooks have spurred fears of a "secular stagnation" of permanently low interest rates and fading equity returns. But it added that those fears are overdone.
"Much of the weakness in emerging markets and China is likely to reflect rebalancing of economic growth, rather than structural impairment," it said. "While the adjustment is likely to take time (as it did in the U.S. and European Waves), it should lead to an unwinding of economic imbalances in time, providing the platform for 'normalization' in economic activity, profits and interest rates."
But when it comes to equity returns, Goldman doesn't necessarily expect emerging markets will regain all their lost luster.
"The fundamental shift in relative performance away from emerging-market to developed-market equity markets, and from producers (and capex beneficiaries) to consumers is likely to continue," it said.
Some aren't as certain that there will be an economic recovery in emerging markets.
The segment's trend growth rate has been declining, exacerbated by a lack of structural reforms over the past 10 years, Deutsche Asset and Wealth Management said in its October outlook note.
"The ultra-expansionary monetary policy of the developed economies prompted many investors to invest in emerging markets in part because they offered an interest-rate advantage," Deutsche said. "In reality, however, this favorable financing environment simply helped emerging markets to veil their growing economic weakness."
But with the easy-money environment spurring over-investment, emerging market companies face not just higher debt, but also potentially burdensome interest payments amid slim economic growth, Deutsche Asset said.
"The risk of credit defaults and bankruptcy is likely to rise," it said. "The combination of high investment rates, rising debt and declining growth has made emerging markets much more vulnerable than before."
Backdoc: THIS NEWS COULD BE A TRIGGER TO PULL THE MARKETS LOWER AND PUT A BOND MARKET IN CRISIS.
WE LOOK FOR PROBLEMS IN LIQUIDITY. WILL THE BOND MARKETS SIEZE UP? DOC IMO
Thunderhawk: Backdoc Alert
China Imports Drop for 11th Month as Export Slump Moderates
China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a re-balancing in the world’s second-largest economy.
Imports plunged 17.7 percent in yuan terms in September from a year earlier, widening from a 14.3 percent decrease in August and posting an 11th straight decline. Exports fell 1.1 percent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).
"We anticipate further headwinds in the coming months," said Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. "Our model suggests that global industrial production will lose further momentum. Not only China but emerging market countries are also struggling with domestic demand."
A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund this month to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year, the world economy will expand 3.6 percent, less than the 3.8 percent projected in July.
The fund left its outlook for China’s growth this year at 6.8 percent and 6.3 percent for next year. Still, the IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”
Backdoc: THE FEDS CONCERN WITH CHINA SEEMS TO BE VALIDATED BY THE PLUNGING PPI NUMBERS AS WELL AS VERY WEAK CPI NUMBERS!
HAVING ZERO INTEREST RATE POLICIES ARE CAUSING DISTORTIONS IN THE MARKETS WILL POTENTIALLY LEAD TO ACCIDENT.
MY GREATEST CONCERN LIES IN THE BOND MARKETS! DOC IMO
Thunderhawk: Backdoc Alert
China’s Lingering Deflation Risks Offer Room For More Easing
China’s consumer inflation moderated and factory gate deflation extended a record stretch of declines, signaling the People’s Bank of China still has room to ease monetary policy further to support a slowing economy.
The consumer-price index increased 1.6 percent in September from a year earlier, slowing from a 2 percent rise in August and compared with a 1.8 percent median estimate in a Bloomberg survey. The producer-price index fell 5.9 percent, extending its streak of negative readings to 43 months, the National Bureau of Statistics said Wednesday.
Backdoc: THE BIGGEST CONCERN HERE IS LIQUIDITY!
FOR EVERY BUYER THERE NEEDS TO BE A SELLER. WITH TOO MANY PEOPLE IN BONDS ALONE THE MARKET IS LIKE OVERLOADING A LIFE BOAT.
THERE ARE TOO MANY AND WHEN SEVERAL WANT OUT AT THE SAME TIME, THERE MIGHT NOT BE ENOUGH LIQUIDITY TO KEEP THE BONDS IN PLAY.
Thunderhawk: Backdoc Alert Black swan risk rises to highest level ever
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Investors fear a "black swan" catastrophic event in the financial markets right now more than ever before.
At least according to the CBOE Skew Index, which measures the prices of far out-of-the-money options on the S&P 500. Its goal is to determine the benchmark's tail risk or the "risk of outlier returns two or more standard deviations below the mean," according to the CBOE website.
Put simply, traders are buying options that pay off only if the stock market drops a whole lot.
Backdoc: TONIGHT WE GOT SURPRISING NEWS WITH CHINAS' ECONOMY WHICH IS A POSSIBLE TRIGGER AS YOU CAN READ IN THIS QUOTE FROM THIS ARTICLE!
We believe we would need to have a systemic shock in order to trigger a liquidity problem in credit such as a further fall in oil, another sharp dollar rally or another negative growth surprise from emerging markets, hence this scenario is a tail risk, but one that in our opinion cannot be ignored."
Thunderhawk: Backdoc Alert UBS: This is How Troubles in the Bond Market Could Impact Stocks
When would-be bond selling becomes actual stock-selling.
Sell what you can, not what you want, goes the old markets adage.
Analysts at UBS appear to have taken that strategy to heart with a new note detailing the stocks that could come under pressure in the event of a big squeeze in junk-rated bonds issued by companies with weaker balance sheets. The idea here is that the hybrid mutual funds carrying big portfolios of both debt and equities could be hard hit in the event of a long-awaited liquidity crunch that sparks turmoil in the corporate bond market.
In that scenario, such funds might find themselves having to meet redemption requests by selling more liquid assets from their portfolios, such as stocks and U.S. Treasuries, as opposed to harder-to-trade corporate bonds.
Backdoc: AS ASIA BEGINS ANOTHER ROUND OF STIMULUS IT SEEMS THAT CHINA WILL BE SURE TO FOLLOW!
GETTING THROUGH OCTOBER IS USUALLY THE MOST CHALLENGING MONTH! DOC IMO
Thunderhawk: Backdoc Alert
Singapore Set to Ease as Currency Faces Rerun of '97 Asia Crisis
Singapore’s central bank is poised to ease monetary policy for the second time in 2015 in an effort to revive dwindling growth, economists predict.
The Monetary Authority of Singapore, which manages the economy through guiding the currency rather than setting interest rates, will boost stimulus when it meets Wednesday, according to 16 of 25 economists surveyed by Bloomberg. The remainder predict no move. The MAS eased policy at an unscheduled meeting in January, saying it would seek to slow the pace of the local dollar’s gains versus its trading partners. At the first of this year’s two scheduled meetings in April, it refrained from further action.
Singapore’s economic performance has worsened since the April gathering. Analysts forecast the nation entered a technical recession in the third quarter, while consumer prices dropped for a 10th month in August, the longest streak of declines since the Asian financial crisis. Analysts predict the currency is on course for its worst year since 1997.