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‘Does a Canary Chirp If No One’s in the Mine?’

"For now, nothing can go wrong. And if you needed any proof that central bank policy is the ultimate driver of these markets, here you have it."

Former FX trader Richard Breslow is back off the weekend and he’s had some Xanax today because there’s nothing particularly angry about his first missive of the week.

In a piece aptly called “Does a Canary Chirp If No One’s in the Mine?”, Richard takes a look back at the overnight action and observes what we detailed earlier this morning – namely that a conciliatory Yellen and the lackluster US CPI print that backed up her Wednesday dovishness was all the excuse Asian equities needed to rally.

That said, there was China.

And while the data helped support an upbeat mood in other Asian markets, there was nothing upbeat about the mood in Chinese equities, which plunged on worries about deregulation.

Read below as Breslow notes how crazy everyone would be going if US equities had taken a dive like what we saw in China and also points out that if there were any lingering doubts about what matters for markets, they were laid to rest last week…

Via Bloomberg

There’s no escaping the fact that the financial world is completely interconnected. Everyday, we say some market was up or down because some other one made a move. In a more direct context, there’s been a lively debate on whether rates can go up in parts of the world and not others. And we’ve pretty much accepted that it will be a global phenomenon, if and when it happens. This morning, I was told that Asian equities were mostly up due to strong economic data from China…


And it was good data, so that made sense…


But look at the wild ride Chinese equities went on and be reminded that what looks like a hazy, lazy summer Monday is masking a lot of potential volatility out there while markets continue on believing, correctly, that the central bank “puts” are very much still in effect.


  • Japan was on holiday and there isn’t much news on the calendar. Not a Fed speaker in sight. European inflation data was benign and low. Certainly nothing that will light a fire under the ECB later this week. European and U.S. equities are trading quietly and calmly. Emerging markets are reminding us that there are no problems in the world. You really have to be amazed at how effortlessly equity volatility in that second largest economy in the world was utterly ignored. It doesn’t fit the script
  • After last week’s data and speeches, markets have concluded they have a clear path at least until autumn. The band has been coaxed into playing another set. For now, nothing can go wrong. And if you needed any proof that central bank policy is the ultimate driver of these markets, here you have it
  • But can you imagine the hysterics if the U.S. indices had the kind of day their counterparts in China had? No one would be talking about anything else. What was the alleged cause of the sell-off? Tighter regulation and easing of the IPO pipeline. That was one doozy of a reaction. I guess Western investors sure are glad that our regulators are debating how to cut back on all those rules. It’ll keep things bid
  • At the end of the day, however, we’d better keep an eye on what’s going on in important markets elsewhere. No matter how much we want to lazily enjoy the interregnum before Jackson Hole. We spend a huge amount of time about the search for the canary that warns about market direction. Well we just heard what may be distinct chirping but the mining stocks went up anyway
  • The Shanghai Composite was saved by a diving catch from its 55-day moving average.  How well it continues to define the downside should be a meaningful input to decisions about your trading strategy for the next period. Oh, and did I mention, the Australian dollar just made another new high today

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