The government statements have been, are and will be lies.
For years we have tried to prevent our readers!!!
They have years saying "everything is better" and "we are well", PLEASE understand that the system is unsustainable!
The global liquidation wave started with Bernanke's statement yesterday, which was interpreted far more hawkishly than any of his previous public appearances, even though the Fed had been warning for months about the taper (even if meant sacrificing what little credibility Hilsenrath had following his latest "blog" article). Still, markets were shocked, shocked.
Then it moved to Japan, where for the first time in months, the USDJPY and the Nikkei diverged, and despite the strong dollar, the Nikkei slumped 1.74%. Then, China was swept under, following the weakest HSBC flash manufacturing PMI print even as the PBOC continued to not help a liquidity-starved banking sector, leading to the overnight repo rate briefly touching on an unprecedented 25%, and locking up the entire interbank market, sending the Shanghai Composite down nearly 3% as China is on its way to going red for the year.
Then, India got hit, with the rupee plunging to a record low against the dollar and the bond market briefly being halted limit down.
Then moving to Europe, market after market opened and promptly slid deep into the red, despite a services and mfg PMI which both beat expectations modestly (48.6 vs 47.5 exp., 48.9 vs 48.1 exp) while German manufacturing weakened. This didn't matter to either stocks or bond markets, as peripheral bond yields promptly soared as the unwind of the carry trade is facing complacent bond fund managers in the face. And of course, the selling has now shifted to the US-premarket session where equity futures have seen better days. In short: a bloodbath.
In fact, no fundamental news at all mattered for a market that is now in liquidation panic mode, selling equities, bonds and commodities across the board: the 10 Year Treasury hitting 2.45% moments ago will not help with the impression that things are spiralling out of control, and the only sell off that is helping the Fed's cause is that of gold which tumbled to two year lows under $1300, driven by a scramble for dollars.
Of course, what the market is forgetting is that just like in Japan a month ago, the volatility that will emerge from Bernanke's hawkish stance will lead to a sell off, which in turn will force the Fed to promptly undo any taper talk, and even promptlier lead to speculation when the untaper will hit. Which is to be expected in a market in which over 50% of the gains since 2009 are on the back of the $12 trillion in global central bank liquidity.
Either way, the plunge protection team will have its hands full this morning to put a halt to the equity sell off. We wish them luck.