{"id":24078,"date":"2017-05-25T09:06:08","date_gmt":"2017-05-25T14:06:08","guid":{"rendered":"http:\/\/olduvai.ca\/?p=24078"},"modified":"2017-05-25T09:06:08","modified_gmt":"2017-05-25T14:06:08","slug":"rbc-explains-what-the-hell-is-going-on-prudent-fed-chinese-intervention","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=24078","title":{"rendered":"RBC Explains What The Hell Is Going On: “Prudent” Fed & Chinese Intervention"},"content":{"rendered":"

RBC Explains What The Hell Is Going On: “Prudent” Fed & Chinese Intervention<\/a><\/h3>\n
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A “prudent” Fed\u00a0<\/strong>(and China’s “National Team”<\/strong>) have spurred a risk-on rally, as RBC’s head of cross-asset strategy Charlie McElligott notes the market’s ‘Pavolovian’ response to Fed’s ‘dovish hints’ contained within the Minutes<\/strong> – despite simultaneously staying \u2018on message\u2019 with hiking \/ tapering commentary – prompts a “QE of old” response<\/strong>: stocks and <\/strong>Treasuries bid, while the USD faded.<\/p>\n

China further perpetuates the \u2018risk rally\u2019 via apparent market interventions<\/strong>:<\/p>\n

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1.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Intervention in FX markets to strengthen the Yuan overnight, with speculation of a number of Chinese banks selling Dollars in the onshore market overnight which drove the Yuan higher.<\/div>\n

2.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Chinese \u201cNational Team\u201d stock market inventions as well, with sharp-turns higher off of an initially weaker equities opening and again-weaker industrial metals.\u00a0 \u00a0Major reversals off lows saw nearly all domestic markets close at highs (Shanghai Prop +2.8%), while Hong Kong\u2019s Hang Seng closed at highs since July 2015, with Chinese real estate developers leading.<\/p>\n<\/blockquote>\n

Initial (and expected) \u2018sell the news\u2019 on the snoozer OPEC outcome, <\/strong>as they extend the output cut 9 months per expectations\u2014which disappointed the \u2018bullish surprise\u2019 camp which anticipated more OPEC-\u2018gaming\u2019 of the market, thinking it was possible for a deeper-cut in conjunction with the consensus extension.<\/p>\n

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This move lower in crude is notable if it were to escalate the\u00a0current rollover in \u2018inflation expectations\u2019<\/strong>\u00a0(10Y BE\u2019s below 200dma) which continue to show as the largest price drivers of risk-assets and major rates markets currently per the QI factor PCA model\u2014although should be noted that both SPX and HYG (US HY proxy) are both deeply OUT OF REGIME with low r-squareds \/ low explanatory power.<\/div>\n<\/blockquote>\n

Due to my much-discussed \u201cChinese deleveraging \/ Fed tightening \/ ECB pivoting \u2018less dovish\u2019\u201d trifecta, we are seeing good buying in cash USTs and receiving in swaps (strong 5Y auction as well) keeping rates pinned despite the ongoing risk-asset rally.<\/strong><\/em><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

RBC Explains What The Hell Is Going On: “Prudent” Fed & Chinese Intervention A “prudent” Fed\u00a0(and China’s “National Team”) have spurred a risk-on rally, as RBC’s head of cross-asset strategy Charlie McElligott notes the market’s ‘Pavolovian’ response to Fed’s ‘dovish hints’ contained within the Minutes – despite simultaneously staying \u2018on message\u2019 with hiking \/ tapering […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,130,15361,303,10949,600,12521,1138,827,3650],"class_list":["post-24078","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-china","tag-chinese-national-team","tag-fed","tag-fx-market","tag-opec","tag-rbc","tag-stock-market","tag-united-states","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24078"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24078\/revisions"}],"predecessor-version":[{"id":24079,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24078\/revisions\/24079"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}