from Larry Levin 's newsletter:
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In my last newsletter I mentioned that the markets had been eerily quiet for quite some time but some volatility had been seen on occasion – to the down side. Friday was more of the same but squared. The markets were crushed!
•The Dow closed -318.25 (-1.96%)
•The S&P 500 closed -38.17 (-2.09%)
•The DAX closed -239.05 (-2.48%)
•The Nikkei closed -406.66 (-2.64%)
What was the cause for Friday’s weakness? It was the same as the prior day…
•Further FOMC tapering back in the news.
•A Japanese finance minister suggesting that the BOJ is done easing.
•USD/JPY down, thus killing those in the carry trade.
•The BOE giving up “rate guidance.”
•Chinese PMI contraction.
•Emerging Market currency problems
What may be interesting to watch this week is a new wrinkle in banking policy out of China: the PBOC ordered commercial banks to halt transfers. Could this make the market more nervous?
I read the following from Forbes:
http://www.forbes.com/sites/gordonchang/2014/01/26/china-halts-bank-cash-transfers-2/
The article describes a 3-day suspension of domestic renminbi transfers. But that’s not all; when it comes to conversion to foreign currencies, there is a 9-day suspension.
The Chinese central bank is blaming this on “system maintenance,” which many are calling preposterous. This is the highest usage period in the year – the weeklong Lunar Year holiday that begins Jan. 31st.
Why would the PBOC do this now? It sounds fishy to me, especially in the light of China’s first impending financial bankruptcy in its shadow-banking system.
Perhaps the PBOC is nervous?
