lunes, 23 de noviembre de 2015

Continúa la depresión como si nada

La depresión económica global continúa, imparable, como si nada. No son sólo los commodities (ver abajo): el comercio mundial de superficie funciona cada vez menos, China tambalea, los EEUU ya no fabrican gran cosa (ver abajo) y las plazas financieras son un campo minado esperando el primer accidente (ver abajo). Algo va a hacer crack, prontito. 

Indice Baltic Dry de fletes marítimos comerciales, últimos cinco años. Bloomberg.

Indice Baltic Dry, últimos 30 años

Las siguientes noticias son todas del Zero Hedge de hoy lunes:

Título: Commodites Plunge To New 16 Year Low; Oil Slides On Venezuela Warning, Soaring Dollar

Texto: As reported last night, ongoing concerns that China's economy is doing far worse than reported when the PBOC lowered its Yuan fixing below expected to the lowest level since August 31, pushed copper futures to a new low not seen since May 2009 while nickel dropped to the lowest level since 2003.

A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies.

As Bloomberg also notes, a London Metal Exchange Index of six industrial metals has fallen for six weeks. Gold has dropped for five straight weeks, crude oil is on a three-week losing run. The Bloomberg Commodity Index is set for its worst year since the financial crisis, plunging 23 percent.

The result is that global miners continue to suffer and basic resource stocks are taking their lead from the slide in commodities. All 17 members of the Stoxx 600 Basic Resources Index are falling today, with Glencore and ArcelorMittal dropping as much as 5 percent. The gauge is this year's worst performing industry group on the Stoxx Europe 600 Index, falling 26 percent. Along with utilities it's the only one to have fallen out of nineteen. Glencore's 2015 decline is 70 percent. Anglo American's is 65 percent. ArcelorMittal has sunk 50 percent.

It's not just the metals though: crude also started the session off on the wrong foot, following this weekend's comments from Venezuela that oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said.

This confirms what Goldman warned last week when it predicted oil dropping as low as $25/barrel if warm weather continues over the winter.

According to Bloomberg, Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said.

Sure, every producer would like a higher price, only problem is nobody wants to be the first to cut production, and so the race to the bottom will accelerate.

OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 45 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market.

“We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”

Also not helping the oil story was news overnight that Chinese oil imports declined even as Saudi Arabia reclaimed its position from Russia as the largest crude supplier to China as OPEC members extended their global fight for market share.

The world’s biggest oil exporter sold 3.99 million metric tons to China in October, 0.8 percent more than in September, data from the Beijing-based General Administration of Customs showed on Monday. Angola, another member of the Organization of Petroleum Exporting Countries, also surpassed Russia in shipping crude to the Asian nation. Russia supplied 3.41 million tons to its neighbor in October, a 16 percent drop from a record in September. Angola’s shipments climbed 27 percent from the previous month to 3.64 million tons, the data showed.

But it's not just the usual suspects who continue to overproduce. Moments ago we got the following Bloomberg headline:


Which means that oil has a lot more downside before a new equilibrium price is established as producers remain reluctant to stop pumping in a deflationary environment where their only hope is to offset sliding prices with soaring volume.

As a result the rolled over WTI January contract was down 3% at last check, down $1.24, and also en route to test the $30-handle which its now expired December contract would be solidly inside.


Título: Copper Futures Crash Close To '1' Handle Amid Record 14th Daily Drop In A Row

Texto: Front-month (Dec) copper futures are trading near $200 ($200.15) for the first time since March 2009 as the collapse in the global economic indicator extends to an unprecedented 14th day in a row. The ongoing collapse appears to have finally impacted Chinese equities which have given up the morning's gains and are drifting rapidly lower. Overall, as Goldman warns, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy.

This is the longest losing streak on record (based on Bloomberg data) and is the worst 14-day loss (down 13.8%) since October 2011...

With a break of $200 being heavily defended for now...

However, as Goldman Sachs details, rising SHFE open interest may flag China demand deterioration

Metals prices have declined by 12%-17% since late October. Over this period, China’s economic data for October has disappointed, the US dollar has strengthened on a trade weighted basis, and the broader commodity complex has moved lower, including most notably, energy prices.

What has also occurred since late October has been an eye catching rise in Shanghai Futures Exchange open interest across the metals complex – for copper, it has been the largest increase in Shanghai open interest in 12 months – since the 1Q15 collapse in Chinese metals demand.

In our view, this development raises a red flag regarding ongoing and near term activity in China’s ‘old economy’ and metals demand growth, as measured by our GS China Metals Consumption Index (see chart below).  Indeed, over the past five years, periods of rising SHFE open interest and falling metals prices have been associated with concurrent or imminent weakening in China’s commodity intensive ‘old economy’.

Meanwhile, though LME and Comex net speculative positioning has also declined over the period, it remains well above its August 2015 lows.

Overall, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, and related metals demand. To the extent that the metals market positioning predicts ongoing and potential future China growth weakness – since mid-2011 SHFE open interest has given a correct bearish signal on four out of five occasions – the latest metal market developments have bearish implications for China’s upcoming activity data releases and asset classes dependent on this data.

It appears Chinese stocks have started to recognize this is a problem...


Título: Oil Tumbles Back Into Red As Saudi "Whatever It Takes" Jawboning Is Not Enough

Texto: Just 2 hours after news broke of Saudi officials discussing the need to do "whatever it takes" to stabilize the oil market - sending crude soaring - half the gains are gone. With the algos tagging Friday's highs, WTI Crude has tumbled back into the red from Friday's close as traders want action not words to solve the massive global oil glut...


Título: US Manufacturing PMI Collapses To 2 Year Low As New Orders, Employment Slow

Texto: Despite EU PMIs surging, US Manufacturing PMI has re-collapsed to 25 month lows as manufacturing employment showed "one of the smallest monthly gains seen over the past five years." The 52.6 print is below October's 54.1 and expectations of 54.0. Export orders saw renewed weakness and overall new orders, output, and employment slowed. Of course, hope remains that the Services side of the economy will maintain the dream of escape velocity but if last month's drop in Services PMI is anything to go by, it seems unlikely.

Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:

“November’s flash PMI survey indicates that the manufacturing sector lost some growth momentum after the nice pick up seen in October, but still suggests the goods producing sector is expanding at a robust pace which should help support wider economic growth in the fourth quarter. The survey data are broadly consistent with manufacturing output growing at an annualised rate of at least 2% in the fourth quarter so far.

“Domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth. Export orders showed a renewed decline, dropping for the first time in three months.

“Manufacturers consequently took a more cautious approach to hiring, with employment showing one of the smallest monthly gains seen over the past five years.

“With the survey continuing to show modest growth, and any weakness linked to the global economy rather than a deterioration in domestic demand, there seems little in the survey results to throw up any roadblocks to a Fed that seems intent on hiking interest rates in December.”


Título: "How Is This Possible" Deutsche Bank Asks, Looking At The Canary In The Junk Bond Mine

Texto: When it comes to recent inexplicable and notable market divergences, few are as disturbing as the gaping spread between equities and junk bonds, best shown on the chart below.

While we have been covering this topic since at least September, when the divergence first appeared, many are starting to ask what is going on. Case in point, DB's head credit strategist, Jim Reid, who like most, is stumped. To wit:

Last week was the best week for the S&P 500 since December 2014 but US HY continued to under-perform virtually all major comparable asset classes. Sentiment wasn't helped by the postponement of the Veritas LBO financing which was the largest private equity buy out of the year. The riskiest part of the market continues to be soft. Our US strategist Oleg Melentyev outlined the divergent performance in his note on Friday night. IG bonds are 5bps tighter since late October, while their HY index is 40bps wider. Within HY, BBs have widened by 20bp while CCC spreads jumped by 75bps - over double what would be appropriate given normal betas. Even in the October rally CCCs lagged BBs in absolute terms which is very rare for such a high beta move tighter. It's not even an Energy story as the numbers are similar with or without.

US HY is also now underperforming all major related markets and is even struggling against much of EM. The big question within credit and to the wider global markets community is whether this can be contained or whether it is reflecting a turning and deteriorating credit cycle that is going to be tough to stand in the way of. Our base case at the moment is that the US is late cycle but that there is probably at least another year left of it. We also think Europe is still relatively steady fundamentals wise. As such we're not inclined to panic by developments in US HY. However it’s something that investors in all asset classes should be keeping an eye on.

They certainly are, and none perhaps better than Reid's colleague at DB, Oleg Melentyev, whose note we summarized over the weekend but here are the key highlights again:

Segments of credit market diverged in the past couple of weeks with higher quality paper holding up relatively well, while lower quality remaining under meaningful pressure. IG bonds are 5bps tighter since late October, while our HY index is 40bps wider. Within HY, BBs widened by 20bp while CCC spreads jumped by 75bps; keep in mind that normal beta between these two segments is 1.6x, so a 20bp widening in BBs should imply a 35bps move in CCCs. This is a continuation of trend we have seen in October, where the second-strongest post-GFC rebound in HY was in fact driven by stronger tightening in BBs (65bp) than CCCs (53bps). Even ex-Energy, relative performance of these two components was indistinguishable (-62 and -65 bps respectively).

* * *

[It] is quite an unprecedented set of circumstances to have a very strong market move tighter that is not led by its higher-beta components. It also gives us a sense of a low level of conviction prevailing among market participants: I don’t want to miss out on the rally and yet I don’t want to touch the high-octane stuff, even ex-energy, as my confidence in issuer fundamentals and persistent low-defaults is diminished.

* * *

Figure 1 shows how CCCs are now underperforming BBs on a trailing 12-month total return basis, by 700bps all-in and 460bp ex-Energy. There are only three instances of underperformance this deep, two of them coinciding with developing credit cycles in early 2000 and early 2008, and one false positive in late 2011. We have previously addressed the latter case in our Evolution of the Default Cycle piece a few weeks ago, pointing at its differentiating features such as early cycle stage (only 2 years out of the previous recession) and easing policy stance (the Fed expanding on its QEs, not rolling them back or hiking rates).

It gets even weirder:

[An] interesting and unusual development is taking place on a high-level across asset classes, where US HY is now underperforming all major related markets, Including loans (-1.2%), IG (-0.5%), equities (-2.1%), Treasuries (-6%), EU HY (-3.7%) and even external EM sovereigns (-4.3%). The most intriguing detail here, in our view, is that HY is underperforming both IG and equities at the same time. Think about how unusual this is for a moment. If HY is an asset class that sits somewhere in the middle on a risk scale between high quality bonds and equities, then normally we would expect it to be underperforming one and not the other, as they would normally move in opposite directions.

Just as important, the weakness is not just in energy names - as Melentyev notes, the recent bursting of the retail bubble suggests the US consumer is quite sick.

Recent disappointing results announced by retailers ranging from Walmart to Macy’s to Nordstrom to Best Buy has also caught our attention as an odd development. Somehow, we were under the impression that these were supposed to be the best of times for the US consumer: employment trends are strong (as evidenced by nonfarm, claims, and unemployment rate), wages are going higher (21 states raised their minimum wages in 2015, as well as some major private employers such as Walmart, McDonalds), gasoline prices are at 10 year lows as are home heating bills, equities are at cyclical highs, and home values have recovered. So if consumers are cutting on their discretionary spending with all these tailwinds in place, there must be something else going on.

That something else could be the Amazon substitution effect, but as Oleg points out, AMZN revenues were $90 billion compared to $1 trillion for all other US retailers: hardly an offset (and it still has $0 net income, when one strips away the AWS business). Additionally, consumers have not had a problem with purchases of staples - the weakness has been entirely in the discretionary spending space, suggesting something else (coughobamacarecough) is soaking up much of this undisposable income:

Melentyev's rhetorical conclusion - how are these gaping, unprecedented divergences between virtually every other asset class to stocks possible?

The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface – including weak commodities, tightening credit, retrenching consumer spending – being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong in its assessment of the current macro environment, and seeing both of them extending well into the future appears unlikely to us.

How? Ask the central banks.

As for this divergence ending soon, don't hold you breath: if these same central banks decide the divergences should extend well into the future with now daily "whatever it takes" statements (even coming from Saudi Arabia as of this morning), expect mass confusion to be the norm for a long, long time.

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