Black Every Day?

China just stunned the markets

The People's Bank of China announced on Thursday that its foreign-exchange reserves surged by $13 billion to $3.21 trillion in June — much to everyone's surprise.

Economists surveyed by Bloomberg expected reserves to come in at $3.17 trillion, in part because of the weaker pound and euro post-Brexit.

Although, the stronger yen — which appreciated by over 7% against the US dollar last month — could have offset some of those effects.

This was the biggest increase in 14 months — although h oldings are still down by about 20% from their June 2014 peak of $4 trillion.

Notably, after the data crossed, economists and analysts all expressed different opinions on what this says about capital outflows.

A Morgan Stanley team led by Gordian Kemen wrote in a note to clients that " ...t he continued stabilization of China's FX reserves over June ... suggests an easing of prior capital outflow pressures."

Capital Economics' Julian Evans-Pritchard and Mark Williams argued that there's some evidence the PBoC is still defending its currency, although pressures have moderated. As they wrote in a note to clients:..

CFER.png


http://www.msn.com/en-us/money/markets/china-just-stunned-the-markets/ar-BBu4Tva?li=BBnb7Kz
 
This is feeling an aweful lot like 1998 ish. The market entered a distribution phase where the smart money was selling to the dumb money, but the market went higher on 100x P/E to fantastic levels still not reached today more than 15 years later.

If that scenario plays out again, I think it is not unreasonable to see SPX at ~2350 by year end. So if you are bearish, don't be a hero and think you know what is going to happen, wait in the bushes and pounce on down moves - this time the pullback from whereever this ends up is not an 8% of 10% move, it is a 20% move.

So there is no reason to have to be right early.
 
This news of a coup in Turkey will not be taken well by markets. If it is not resolved by Sunday night, I expect we will see a sea of red.

I am mostly interested in how it affects gold and oil. I think neither one will move much on it, with mostly bond markets and equity markets reacting in no small way on no resolution. But who knows...
 
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