Risk On is Back. Wile Coyote in Full Speed

It’s risk ON time again. So says global equity markets led by the US.

From Bloomberg:

U.S. stocks rose, giving the Dow Jones Industrial Average its biggest gain since July 11, as exports from China topped forecasts and corporate acquisitions fueled optimism in the world’s largest economy.

Chinese exports supposedly rose 7.2 from a year earlier exceeding the 5.5% median estimate. And because consumer prices rose only 2.6% media sees this as an opportunity for “extra stimulus if needed”

But what markets have ignored has been that while exports outperformed, imports underperformed. From an earlier Bloomberg article:

Imports (CNFRIMPY) rose a less-than-estimated 7 percent from a year earlier, leaving a trade surplus of more than $28 billion, customs data showed yesterday.

As one would note, markets appear to be selectively picking on data to justify yield chasing.

Another reason for the rally, as usual, addiction to stimulus. From the former Bloomberg article

The equities gauge has rallied 17 percent this year as the Fed continued to provide stimulus to the economy. A report Sept. 6 showed payrolls in the U.S. climbed less than projected in August and gains in the prior two months were revised downward, fueling speculation that any Fed move to taper its stimulus program will be limited.

See Bad new is good news. Wall Street cheers on negative main street activities.

Markets expect tapering to be minimal. The Federal Reserve Open Committee convenes next week September 17-18 and the markets seem as anticipating such action or may be seen as applying pressure on the Fed to do as they expect.

Another variable for the risk ON mode has been the alleged acceptance by the Syrian government to surrender chemical weapons to Russia. Secretary of State John Kerry gives an ultimatum of one week to Syria

This looks like Russia’s Putin has given US President Obama an opportunity for a graceful exit as only about 10% of house representatives are in favor of Obama’s proposal for a military strike 

WTIC Oil fell to $108 along with gold. Yields of UST dropped by 41 basis points to 2.897%. Importantly the risk On mode means a weak dollar as the US dollar index fell by .44%

Risk ON is back. We are made to believe that the June episode had merely been a shakeout.

Shanghai Index rising on stealth stimulus.

Nikkei appears to reversing to the upside.

Europe’s STOX50 while down last night has also been largely buoyant.

As for the ASEAN meltdown, forget about it. They never happened.

Singapore STI clings to the hopes of a recovery of the Chinese economy. Yet China’s property bubbles seem as intensifying. Residential land sales amidst property curbs are not only at  record highs but home prices are outpacing construction activities.

A full blown mania can be noted in the below article from the Wall Street Journal. (bold mine)

The pent-up demand driving China's housing prices ever higher was on full view at the launch of the manicured Shanyucheng apartment complex in Beijing's outermost suburbs. A shouting match flared up when 500 people came to sign up to buy 200 units on Saturday and the latecomers realized they had little chance.

Property bubbles have been a global phenomenon

From Bloomberg:

Global house prices rose by an average of 2.4 percent in the second quarter, the biggest increase in three years, as Dubai and Asian markets including Hong Kong and mainland China rallied, Knight Frank LLP said.

Dubai had the largest increase, with prices surging 21.7 percent from a year earlier, the London-based property broker said today in a report. Taiwan recorded the biggest jump compared with the previous quarter, with a 7.4 percent gain.

Turkey, Europe’s strongest performer, saw prices rise 12.2 percent from last year, while Greece was the continent’s weakest with an 11.5 percent drop in values.

“For the first time since 2010, European countries recorded positive annual price growth,” analyst Kate Everett-Allen wrote in the report. “However, the average 0.7 percent uplift over the past 12 months masks a sharp divergence in performance between individual countries.”…

Home prices in the U.S. increased 7.1 percent in the second quarter from the previous three months, the second consecutive quarterly rise. Prices in the U.K. advanced 2.6 percent in the period.

Hong Kong climbed 19.1 percent and China gained 14.8 percent in the last 12 months. Though the annual growth was among the world’s highest, China’s prices were unchanged in the second quarter from the first and Hong Kong rose 1.2 percent.

Rallying risk assets everywhere…

Big rallies in Thailand’s equities…

Malaysia….

and Indonesia.

The China-FED inspired rally will likely spillover to the Phisix.

Yet the big rally in ASEAN equities has had marginal impact on Indonesia’s currency (the one big sensitive spot)

Rallying global equity and property markets despite elevated bond yields and $100+ oil accentuates signs of a deepening mania or the Wile E Coyote Moment.