Chinese regulators remove circuit breakers, markets close higher

Friday, January 08, 2016

Chinese markets began to show some signs of stability overnight, much to the relief of anxious market participants after a bearish start to the year which saw the benchmark Shanghai Composite and CSI 300 indices lose over 12% apiece this past week. Oddly enough the stability seen overnight, which saw both indices add roughly 2% on Friday despite intra-session moves hitting fresh multi-month lows, came as regulators removed the circuit breakers which forced the closure of markets once a 7% loss was registered.

It would appear that doing less is more in this regard and while policymakers in Beijing have shown an increasing willingness to prop up financial markets this over reliance on the Beijing put may in some cases be making the situation worse. The Chinese yuan also stabilised with the offshore exchange rate trading around 6.6580 at the European open after a modest recovery towards 6.6525 against the dollar failed to take root.

Front month Brent futures hit a fresh eleven year low yesterday towards $32,16/bbl as prices surpassed the trough seen during the global financial crisis. The heavy selling yesterday, which saw the global benchmark trade as much as 6.8% lower and post losses for the fourth consecutive session, was indicative of the widespread bearishness across global risk assets. Adding to crude oils woes was the revelation that the OPEC daily basket price of crudes fell to $29.71 on Wednesday, the first time the basket price has dropped below $30/bbl in almost 12 years.   

Spot gold prices reflected the cautious return to risk assets with the overnight session snapping a four session bull run as the precious metal attempted to gain a footing above the 100 day moving average. After hitting a fresh two month high above $1,113/oz spot gold prices headed nearly a percentage point lower, trading around $1,100 at the time of writing.

Offshore yuan stabilises after a volatile week

CNH Curncy Offshore Deliverable 2016 01 08 08 02 23

Spot gold prices snap bull run 

XAU Curncy Gold Spot Oz D 2016 01 08 07 51 42

Events for today

0700

DE

Nov

Industrial Production

0700

DE

Nov

Trade Balance

0930

UK

Nov

Trade Balance

1330

US

Dec

Unemployment

1330

US

Dec

Nonfarm Payrolls

Topics: Gold, Crude oil, Brent, CNH
More from: Kash Kamal