Académique Documents
Professionnel Documents
Culture Documents
Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes
To Halt Rout
by Tyler Durden
Jul 18, 2017 6:40 AM
15
SHARES
The sliding dollar sent the Euro surging as high as 1.560, the highest since May of 2016, and sending European lower for first
time in five days amid concern a stronger euro would damp exporters earnings.
ADVERTISEMENT
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 1/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
Any hopes of dollar support from a successful vote on the Senates health-care bill look to be vanishing, said Rodrigo Catril, a
currency strategist at National Australia Bank quoted by Bloomberg. Near term, the dollar path of least resistance is down. We
still think the data - inflation in particular - will provide the Fed with enough ammunition to hike in December and boost the
dollar, but this is a fourth-quarter story.
There were no Chinese fireworks today and no ChiNext "Black Tuesday" largely because Beijing was determined to stop the rout
after what appeared to be another "national team" intervention in the last two hours of trading. Earlier in the session, Chinese
stocks fell after Mondays selloff as concern about tougher regulations still unnerved the market.
Sunac China Holdings tumbled in Hong Kong after a local media report that banks are reviewing the companys credit risk. The
Shanghai Composite had dropped as much as 0.6% at the midday break local time after falling 1.4% on Monday, its biggest one-
day plunge in seven months, while the ChiNext gauge slipped 0.8% after sinking 5.1% on Monday, however the now familiar late
trading levitation sent the SHCOMP up 0.4% while the ChiNext closed 0.7% higher. Meanwhile, Sunac China - which we will have
more to say about later - plunged as much as 13%. The company, one of China's most aggressive acquirors, has seen its
proposed plan to buy Dalian Wanda assets trigger concern among lenders and Beijing.
ADVERTISEMENT
it was a busy overnight session in macro with the Aussie soaring to the highest since May 2015 after upbeat RBA minutes
flagged improved 2Q growth alongside expectations of increased fiscal spending while suggesting growth is picking up and the
estimated nominal neutral cash rate at 3.5%. The announcement caught AUD shorts wrongfooted and started a major squeeze
while sending Australian 3-month bank bills sharply lower in heavy selling while 3-year yield rose as much as eight bps to
2.11%. To stabilize the financial system ahead of a surge in liquidity demands, the PBOC injected net 170 billion yuan of liquidity
which some however said would not be enough and as a result interbank rates jumped the most in one month; the Yuan gained
against dollar while the Shanghai Composite 0.6% lower. Dalian iron ore jumped 4.8% with futures hitting the highest level since
May on strong demand from Chinese steel mills.
Tempered expectations for Trump's spending plans weighed on European bond yields which edged lower, tracking U.S.
equivalents, after the collapse of the second healthcare bill. U.S. 10-year bond yields fell after the news, while German 10-year
yields dipped 2 basis points to 0.57 percent when European trading started on Tuesday. In European stocks, the Stoxx Europe
600 Index fell following a grim earnings report from Ericsson AB, which led the decline.
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 2/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
600 Index fell following a grim earnings report from Ericsson AB, which led the decline.
Elsehwhere, the pound tumbled by 100 pips to just above 1.30 after UK CPI disappointed to the downside, sliding to 2.6%, from
2.9%, missing expectation, potentially putting the BOE's rate hike expectations on hold.
Meanwhile, in the US, S&P futures were little changed ahead of earnings reports by Bank of America and Goldman Sachs. IBM
reports after the close.
In commodity markets, oil prices steadied as expectations of firm demand, particularly from China, was met ample supply
despite Ecuador announcing it would exit the OPEC production cut deal. Brent crude futures eased 0.1 percent to $48.35 a
barrel while U.S. crude oil fell 0.2 percent to $45.93. The ongoing dollar weakness sent gold higher for another day, with the
yellow metal trading as high as $1,238 overnight.
ADVERTISEMENT
Market Snapshot
U.K. inflation unexpectedly slowed in June, giving respite to Bank of England policy makers concerned that price growth
was getting out of hand
Citigroup Inc. has chosen Frankfurt as its newest trading hub in the European Union and plans to present that option to its
board of directors this week for approval, according to a person with knowledge of the decision
Policy makers from Stockholm to Bucharest are now waiting for their colleagues at the European Central Bank to kick off
unwinding the record stimulus that was unleashed in the aftermath of the global financial crisis. This Thursday, theyll be
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 3/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
watching for any new signals from President Mario Draghi, who hinted last month that the end of the road was
approaching
Senate Majority Leader McConnell abandons broad Obamacare replacement vote to seek straight repeal; Trump urges GOP
to work on new plan, start from clean slate
RBA minutes say growth likely increased in 2Q; stronger labor market removes some of the downside risk to wage
growth forecast; estimates neutral nominal cash rate of around 3.5%
CBRC told some Chinese lenders to lower returns on wealth products
China should achieve clean floating yuan exchange rate: Financial News
New Zealand 2Q CPI 0.0% vs 0.2% estimate, y/y 1.7% vs 1.9% estimate
Wells Fargo Buys Rest of $10 Billion Active Quant Firm Golden
BNP Paribas Fined $246 Million Over Currency Manipulation
Feds Long-Run Miss of Inflation Goal Undermines Rate Hike Case
Medtronic Computer Crash to Crimp Quarterly Sales, CFO Says
Asian equity markets traded higher as investors await quarterly results this week. ASX 200 (-1.1 %) traded negative with the
financial and utilities sectors weighing on the index, whilst Nikkei 225 (-0.6%) was also in the red amid a stronger JPY, following
safe-haven flows into the Japanese currency after news that two US Republican Senators are to vote against the Senate
Healthcare bill. Elsewhere, Shanghai Comp. (+0.4%) and Hang Seng (+0.2%) jumped following the latest PBOC intervention
helped by a CNY 170bIn liquidity injection by the PBoC. Finally, 10yr JGBs traded higher amid caution in the region, with
flattening seen in the belly of the curve.
European bourses were marginally affected by the data, with the FTSE benefiting of the lower chance for an august move.
Ericson is the clear under-performing stock amid reporting poor results, with the majority of indices being dictated by earnings.
Gilts saw the most influential reaction to the UK data, as the UK paper traded up around 70 ticks following the result, the lOy did
slow however, around the 126.80 level (July's High). Periphery bonds trade higher, led by Greece which trade at record levels, set
to hit the market this week.
In commodities, the commodity complex continues to be led by precious metals, albeit marginally so. The safe haven flow has
been evident following the overnight reports that US Republican Senators Moran and Lee are to vote against Senate Healthcare
Bill, as markets begin to prepare for an imminent winter for President Trump. Oil markets trade marginally higher, with WTI
bouncing off the 46.00 area, further support from a trendline beginning on July the 10th.
Looking at the day ahead, in the US this afternoon well get the June import price index print along with the NAHB housing
market index reading for July. Earnings should be a decent focus for the market today too with Goldman Sachs and Bank of
America the latest banks to report (both prior to the open), while Johnson & Johnson (pre-open) and IBM (post-close) are also
scheduled.
US event calendar
8:30am: Import Price Index MoM, est. -0.2%, prior -0.3%; Import Price Index ex Petroleum MoM, est. 0.01%, prior 0.0%
Import Price Index YoY, est. 1.25%, prior 2.1%
Export Price Index MoM, est. 0.0%, prior -0.7%; Export Price Index YoY, prior 1.4%
10am: NAHB Housing Market Index, est. 67, prior 67
4pm: Total Net TIC Flows, prior $65.8b; Net Long-term TIC Flows, prior $1.8b
To be frank, yesterday was relatively dull and my train definitely had an air of emptiness that only arrives with the start of school
holidays. Of the main DM equity markets, the S&P, Dow, Nasdaq, Stoxx 600, CAC, IBEX, FTSE MIB, PSI and SMI all finished less
than +\- 0.10%. That was even after all the excitement of the huge swings in Chinese bourses 24 hours ago with the Shanghai
Comp and Shenzhen in particular seeing high to low swings of 2.81% and 4.09% respectively as the market balanced that strong
data versus the potential for tougher financial regulation following the PBoC meeting over the weekend.
By and large it was China-sensitive assets which were really the only markets to see any significant moves yesterday. That was
most apparent in base metals with Iron Ore (+1.63%), Copper (+1.18%) and Zinc (+1.04%) all standing out. Bond markets were
also a smidgen stronger on fairly limited newsflow and thin volumes as the market awaits the ECB meeting later this week.
Benchmark 10y Treasury yields edged down 1.8bps to 2.315% while Bunds finished just over a basis point lower at 0.576% with
the periphery down 3-5bps. Away from that Sterling (-0.33%) struggled from the get go yesterday and weakened as the day
progressed as the second round of Brexit talks between David Davis and Michel Barnier got underway. There wasnt any
significant new updates to report and instead its expected that technical teams will carry on work behind the scenes to iron out
the details for EU citizens rights in the UK with a further update to possibly come on Thursday.
This morning in Asia the tone for the most part has been modestly risk-off. The Nikkei (-0.62%), Hang Seng (-0.20%), Shanghai
Comp (-0.32%) and ASX (-1.27%) have all weakened. This more than likely reflects a combination of news out of both China
where the banking regulator has imposed lower rates on wealth management products and the news out of Washington that
two more Republican senators have opposed the latest version of the health care plan. This doesn't look good for Mr Trump and
his legislative agenda. US equity index futures are also in the red, while the USD has weakened -0.43%. Some of the macro data
this morning has garnered some attention too. In Australia the latest RBA meeting minutes included a new reference to a neutral
nominal cash rate which partly explains a +1.20% rally for the Aussie Dollar. Across the Tasman, New Zealand Q2 CPI
disappointed (0.0% mom vs. +0.2% expected) which continues the theme of some disappointing global CPI reports in recent
days. As we'll see in the data ahead it's the UK's turn this morning on inflation.
Its worth noting that following the close last night in the US, Netlifx shares surged as much as 11% following the latest quarterly
earnings report. While earnings were largely in line, revenue topped forecasts and subscriber growth surged more than
expected. While Nasdaq futures have weakened overnight in line with other bourses following the latest health care
developments, itll be interesting to see if the results help cap a full recovery in the Nasdaq which was down as much as 4% from
the peak on June 9th to the lows on July 6th. It closed last night off just 0.40% from the highs so that Netflix boost might help
sentiment in tech stocks again after a more difficult month or so. Moving on. Yesterday also saw a landmark day for the ECB as
the CSPP holdings went above 100bn for the first time. To put things in perspective, a similar market cap company would be
the 18th largest in the Stoxx 600 and 42nd largest in the S&P 500. It's also roughly equivalent to the annual national output of
Kuwait - the 59th largest economy in the world as of 2016.
While we're on such comparisons, the entire ECB balance sheet now stands at 4.21tn, which now has the largest central bank
holding in the World. This is comparable to the annual GDP of Japan (4.30tn) - the 3rd biggest economy in the world and a
decent distance ahead of Germany (3.02tn) - the fourth largest. It's staggering to think of it in those terms.
Back to the more mundane, net CSPP averaged 286mn/day last week, well below the 365mn average since the program
started. However last week saw European markets wind down a little with Bastille Day on Friday and the strong buying recently
perhaps reflected a desire to front load ahead of what will now be relatively illiquid summer markets. The CSPP/PSPP ratio was
10.4% last week, which is below the long-term average (even before QE was trimmed in April). However the same ratio for the
past two weeks is 13.4%. Indeed the evidence from the more than three months of purchases since QE was trimmed continues to
be that the CSPP has been trimmed notably less than the PSPP (CSPP/PSPP ratio 13.6% since April compared to 11.6% before
then).
Staying with bonds, it was interesting to note the various stories doing the rounds yesterday suggesting that Greece may be
returning to the primary bond market for the first time since August 2014. Both Bloomberg and the FT are reporting that Greece
is looking to bring a 5y deal to market this week or next following the repayment of a 3y bond yesterday. Notwithstanding the
fact that debt relief debates are still yet to be concluded, with 3 bailouts in the last 7 years, and the fact that the country also
came close to exiting the Euro, it would make for a fairly symbolic step.
Before we look at todays calendar, a quick wrap up of the few data releases out yesterday post the China numbers. In Europe
there were no surprises to come from the final June CPI revisions with headline CPI confirmed at 0.0% mom and +1.3% yoy
respectively (unrevised) and the core confirmed at +1.1% yoy (also unrevised and up from +0.9% in May). In the US the NY Feds
empire manufacturing survey for July dipped 10pts to 9.8 (vs. 15.0 expected), albeit still above the level seen in both April and
May.
Looking at the day ahead now, this morning in Europe the early focus is likely to be on the ECB bank lending survey for Q2
which we are expecting to receive at around 9am BST. Shortly following that well receive the June CPI/RPI/PPI data docket out of
the UK where market expectations for headline and core CPI are expected to hold steady at 2.6% yoy and 2.9% yoy, respectively.
Following that well receive the July ZEW survey in Germany. Over in the US this afternoon well get the June import price index
print along with the NAHB housing market index reading for July. Earnings should be a decent focus for the market today too
with Goldman Sachs and Bank of America the latest banks to report (both prior to the open), while Johnson & Johnson (pre-
open) and IBM (post-close) are also scheduled.
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 5/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
Select your preferred way to display the comments and click "Save settings" to activate your changes.
Also Bitcoin and gold are up. Confidence is the US$ may be going down, but buying EUROS??? Must be the
traders...
Trump might have been right earlier: just let DemocratCare die its natural death, it's unsustainable on its current
track.
And therein lies the deleterious unintended consequences, resulting in this country's long term, accelerating descent
into the abyss.
Why implement fiscal/entitlement reform if int rates are at rock bottom levels? Why implement healthcare reform if
the stock market is it all time highs? All is clear for the incumbents--push the crisis into the future, onto someone
else...
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 7/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 8/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 9/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 10/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 11/12
18/07/2017 Dollar Tumbles, Euro Soars After Obamacare Repeal Dies; China Intervenes To Halt Rout | Zero Hedge
http://www.zerohedge.com/news/2017-07-18/dollar-tumbles-euro-soars-after-obamacare-repeal-dies-china-intervenes-halt-rout 12/12