The Daily Shot And Data - March 9, 2016

Yesterday's weak report on China's trade dampened the risk-on sentiment in the markets. The spike in China mainland's "imports" from Hong Kong, which exaggerated the size of transactions to skirt capital controls, indicates that capital outflows from China continue. It seems that companies and some well-off households are bracing for more RMB devaluation.

Source: @SoberLook

Copper fell 3% on the day as risk-on sentiment dissipated.

Source: Investing.com

Iron ore gave up nearly 5% and other commodities retreated.

Source: barchart

By the way, analysts are scratching their heads trying to figure out the reasons behind the massive iron ore rally (followed by the large decline). While most believe it has to do with China stimulus expectations, here is an alternative (rather bizarre) explanation. It has to do with the 2016 International Horticultural Exposition to be held in the province of Hebei, from late April to October.

Source: ‏Bloomberg.com

Crude oil fell on renewed worries about the glut in the market and a caution from Goldman. The realization is setting in that the oil producers' output freeze is not a done deal, as we heard from Kuwait.

Source: Al Arabiya

Goldman pointed out that while US production is indeed declining ("green shoots"), the market remains oversupplied.

Source: Goldman Sachs

Continuing with the energy markets, a US bankruptcy judge allowed an oil company to walk away from it pipeline contracts. This is a big deal.

Source: @FT

This ruling could be a disaster for some "midstream" MLPs who rely on lucrative long-term pipeline contracts to pay their dividends (MLP index chart shown below). That won't work well if producers begin walking away from these agreements.

Source: Google

It seems that there is much more natural gas in the US than previously thought - which does not help prices.

Source: @business

US railcar loadings seem to have picked up lately. But does that necessarily imply improved economic activity? An alternative explanation is the usage of railcars for oil storage - a sort of "floating storage on land". With storage cost elevated and a steep contango, why not?

Source: @bySamRo, @RenMacLLC, h/t @HayekAndKeynes

Source: La Crosse Tribune

In other commodity news, apparently BlackRock got into trouble issuing massive amounts of its gold ETF to meet demand and not registering all the new shares. The gold ETF balances continue to rise relative to the physical gold registered with Comex. As discussed before, there is more "eligible" but not registered gold out there which this ratio isn't taking into account. Nevertheless this is spooking some market participants.

Source:@valuewalk, @MoneyMetals

Source:@BNCommodities

Economic reports from Japan remain mixed. The nation's machine tool orders are still declining.

We've had tremendous movements in Japan's government bond curve yesterday. The 10-year yield moved deeper into negative territory.

Take a look at this decline in the 30-year government bond yield; spectacular...

And the yield curve flattened sharply.

Source: ‏@SoberLook

By the way, here is what the latest positive/negative yield map looks like.

Source: ‏@martin_whetton, @katie_hill2

Will the recent volatility and market pressure on banks derail improving credit conditions in the Eurozone?

Source: JPMorgan, h/t Josh

Tighter credit conditions would undermine monetary transmission (low ECB rates are being passed on to borrowers), which has become more effective recently.

Source: JPMorgan, h/t Josh

Capex in the Eurozone seems to be improving, as shown in this GDP breakdown.

Source: ‏@HolgerSandte

In the UK we are looking at a binary outcome for the British pound. The chart shows the euro going to parity with the pound if "Brexit" vote wins.

Source: UBS, h/t Josh

By the way, the UK media is buzzing with this news ...

Source: @POLITICOEurope

Switching to emerging markets, here are a couple of developments.

1. Fewer tourists are visiting Turkey (we know the Russians are staying away).

2. Brazil's equities saw a large inflow from foreigners. More people are betting on political changes there.

Sourcee: @IIF

3. Chinese cement prices continue to fall.

Source: ‏@vexmark

At the same time China's government-sponsored venture investing is taking off. Bejing is trying to rebalance the economy.

Source: Zero2IPO, Bloomberg, @SoberLook, h/t @vexmark

4. The IIF Asia GDP tracker seems to show a much weaker growth ahead for the region.

Source: ‏@IIF

Australia's housing finance seems to have peaked. Is the nation's frenzied urban housing boom slowing?

Source: @ANZ_Research

By the way, the debate on changes to "negative gearing" tax treatment of investment properties his heating up. Depending on the outcome, this could create some headwinds for the market.

Source: @katie_hill2

Canada-US rate differential is rising again - should the US dollar rise as well?

Source: Scotiabank, @sobata416, h/t Josh

Canadian housing starts were stronger than expected. All is well...

Source: Investing.com

Back in the United States we have the following developments.

1. The NFIB US small business sentiment index continues to decline; misses estimates.

Source: NFIB

Additionally, US small businesses are facing margin pressures again. Wages (and therefore labor costs) are rising while competitive pressures (and a stronger dollar) are forcing businesses to cut prices.