Markets in 3 Minutes: Chinese Stocks Snowball, Oil Prices Chill

Paul Dobson, Tom Mackenzie and Kriti Gupta break down today’s key themes for analysts and investors on “Bloomberg Markets Today.”
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Let’s start on the China question then that crit raises the loan prime rate unchanged not a big surprise given that the pboc held their main rate what a week ago so why the further downside coming through for Chinese equities starting to look and starting to resemble Panic now when you look at the

Moves that we’ve seen yeah and the most obvious answer for markets is always more sellers than buyers when we’re going in this direction some but I think that that’s really the case here you know we’ve been seeing this big Exodus of internal investors we’ve also been seeing um

Local funds closing down or being liquidated as well so that’s draining more of the investment from the Chinese equities market now one other thing going on under the surface which is really interesting but quite nebulous and difficult to unpick is this idea of uh so-called snowboard trades or Structured Products and those are

Typically higher yielding um sort of Investments that you can make um the the that will pay you a decent yield just so long as certain conditions aren met which are usually a long way out of the money when when they’re struck so a big decline in equities is one of them and

Compared with where we are when some of those deals were arranged they’re now falling to the bottom of that to what’s called a a Knockin level it’s not entirely clear whether there are people deliberately targeting those levels to try to push the market through them or whether as we ping through those levels

It’s exacerbating the setting pressure but between the two of them the snowball products are actually triggering some of this Snowball Effect that’s having that uh downward drag on the Chinese Equity markets so that’s the Chinese Equity Market but then let’s go cross asset here Paul because when you see this kind

Of risk sentiment in the other parts of the world commodity markets are usually in line with it you’re not just seeing the oil price you’re seeing it in natural gas and agricultural Commodities why is the commodity sector left out of it is there a China read through as

Well yeah well I think Commodities is really interesting because with all of the riskof news that we had around the Middle East over the weekend you might expect uh that there would be something of a rally in the oil market today instead it’s all about the supply demand

Dynamics again really you know more sellers than buyers again here we’ve got a big Libyan oil stream uh coming coming back online and that’s putting more crude oil supplies into the market we’ve got uh relatively subdued and complacent natural gas consumption across Europe partly because of the economy but partly

Also because this last week uh excepted we’ve had pretty benevolent weather conditions too and plenty of gased in storage so all over it the commodity still kind of uh the demand isn’t really taking it higher and the supply is kind of comfortable so we’re sitting in this kind of stasis

Level Paul very briefly have the boj of course that decision tomorrow and then the ECB on Thursday where is your focus yeah I think we’re going to be looking very carefully at the boj’s guidance what are they going to be telling us about the timing of liftoff

Are we getting closer are they confident in the economy ECB I think Lard has been very clear on uh we’re waiting until the summer so uh you know we might well take a pass on this one hund vu in the next few meetings as Tia used to say