World Financial Markets In Panic

China Crashes: Shanghai Composite Plunges 5.4% Amid Record Trading, Biggest Tumble Since 2009

Those who have been following the ridiculous moves in the Shanghai Composite in recent months, knew it was only a matter of time before yet another major stock market (one which recently surpassed the Nikkei for the second largest spot in the world) crashed violently, further eroding faith in the centrall-planned “price discovery” process. The only question was when.


Following our report last night about China’s change in collateral rules, in which we noted that none other than the PBOC was now eager to pop the equity bubble following the PBOC simultaneously fixing the CNY significantly stronger (implicit tightening) and enforced considerably stricter collateral rules on short-term loans/repos – a move which according to estimates from Shenyin Wanguo Securities, would disqualify some 1.25 trillion yuan in corporate bonds as repo collateral, or 60% of all outstanding corporate bonds listed on China’s two stock exchanges – we were not surprised to see the tumble in the market-traded Yuan (which crashed the most in 6 years), and the surge in interest rate swaps, coupled by the plunge in corporate bonds.


That said, we summarized it as follows:
The PBOC has aggressively taken action to reduce leverage in stock and bond market speculation
The PBOC has tightened monetary policy – raising FX and cutting collateral availability
The PBOC has created a major squeeze in USDCNY – stalling carry trades


We concluded as follows: “We will see what kind of fallout this creates but for now stocks are holding up as FX and bond markets are turmoiling.”


* * *


We didn’t have long to wait, because literally a few short hours after we wrote that sentence, this happened:
CHINA’S SHANGHAI COMPOSITE INDEX DROPS 5% AMID RECORD TRADING


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Putin stockpiles gold as Russia prepares for economic war

Russia’s central bank added to its reserves of bullion in the third quarter, according to the latest report from the World Gold Council.

By Andrew Critchlow, Commodities editor
13 Nov 2014

Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.

The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tonnes of the precious metal – far more than any other nation – in the three months to the end of September as prices began to weaken.

Vladimir Putin’s government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the rouble.

Russia’s currency has come under intense pressure since US and European sanctions and falling oil prices started to hurt the economy. Revenues from the sale of oil and gas account for about 45pc of the Russian government’s budget receipts.
The biggest buyers of gold after Russia are other countries from the Commonwealth of Independent States, led by Kazakhstan and Azerbaijan.

In total, central banks around the world bought 93 tonnes of the precious metal in the third quarter, marking it the 15th consecutive quarter of net purchases. In its report, the World Gold Council said this was down to a combination of geopolitical tensions and attempts by countries to diversify their reserves away from the US dollar.

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Russia may ban the circulation of the United States dollar.

The State Duma has been submitted a relevant bill

Moscow. Farid Akbarov – APA. Russia may ban the circulation of the United States dollar.

The State Duma has already been submitted a relevant bill banning and terminating the circulation of USD in Russia, APA’s Moscow correspondent reports.

If the bill is approved, Russian citizens will have to close their dollar accounts in Russian banks within a year and exchange their dollars in cash to Russian ruble or other countries’ currencies.

Otherwise their accounts will be frozen and cash dollars levied by police, customs, tax, border, and migration services confiscated.

After the law enters into force, it will be impossible to obtain cash dollar in Russia. The ban or termination of the US dollar will not apply to the exchange operations carried out by Russian Central Bank, the Russian government, ministries of foreign affairs and defense, the Foreign Intelligence Service and the Federal Security Service.

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Russians and Chinese are ditching the dollar as Europeans start using renminbi in their reserves

by Simon Black on October 17, 2014 Sovereignman.com

At present, US dollar accounts for roughly 61% of the world’s foreign exchange reserves.

It’s still a safe bet for most, not because the currency is actually strong, but because so many others are already so reliant on it.

Between those with reserves in and pegs to the US dollar, many countries have given their allegiance, and now have a vested interest in the health of the currency.

Due to this common interest, a sort of unofficial, involuntary alliance has been formed between them all.

Together, they’re all playing along, pretending that everything is fine. If the dollar collapses, they’re all screwed, so they’ve got to get each other’s backs.

From the throne of the world’s reserve currency, the Federal Reserve, with the power to print the US dollar, feels dangerously omnipotent.

They can get away with just about anything. For now.

The central bankers get to print dollars and spend them at current prices, before the stuff hits the wider market and diminishes its overall value.


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U.S. Mint Sells Over 750,000 Ounces Of Silver In One Day

The market reacted to the big drop in the paper price of silver by a huge increase in Silver Eagle purchases.  September was turning out to be a much stronger month compared to July and August even before the last update of the month.

On Monday, the U.S. Mint reported 3,375,000 sales for the month.  Then this evening, I checked to see if they had updated their figures.. which they did in A BIG WAY.

In one day, the U.S. Mint sold 766,000 Silver Eagles, more than all the Gold Eagles sold to date.  Actually, is was more than double the 379,000 oz of Gold Eagles sold this year.

If we look at the chart below, sales of Silver Eagles in September, were double that of July and August:

Silver Eagle sales were quite strong in the beginning of the year and started to slow down in June.  However, the manipulated lower price of silver motivated investors to ramp up the purchases making September one of the three strongest months of the year.

Only January and March were stronger than the 4,140,000 Silver Eagle sales in September.  The total for the first three-quarters of the year is 32,251,000.

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