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The Daily Shot

Greetings,

We begin with China where a number of key economic reports were released this morning. The figures missed forecasts across the board: Industrial Production, Fixed Asset Investment Growth, Retail Sales, QoQ GDP - all were slightly weaker than projected.
Source: Investing.com
Source: Investing.com
Source: Investing.com
The year-over-year GDP growth hit the lowest level since the 90s. And that's assuming the figure is close to reality - which many analysts continue to doubt.
The nominal GDP growth is especially ugly (the one in US dollar terms is not very meaningful).
Source: @s1moncox
Having said all this, is the situation on the ground in China really deteriorating as some pundits would like us to believe? Is it possible that the China's economic bogeyman is not as bad as the panicky investors think it is?

Anecdotal evidence (after talking to folks in China) suggests that while the nation has its share of problems, there are NO signs of a rapid economic deterioration.

Some of the best indicators of industrial and construction trends are China's iron ore and steel markets. Surprisingly, both are showing stabilization in December and January.
Source: barchart
Source: barchart
China's fiscal stimulus is kicking in and - once again - the fears of a "hard landing" seem to be overblown.
Continuing with a bit of contrarian thinking, here is the Google Trends index (search frequency) for the term "sell stocks". The frequency is at the highest level since 2008 as the public wants to know if they should be dumping their portfolios. Scared? Don't be. When the public is trying to find out if they should be selling their shares from a Google search, it tells us that it's time to take a contrarian view.
Source: Google Trends
Moreover, we had this from RBS last week.
Source: The Telegraph
Wait, isn't this the same institution that "bought everything" (especially RMBS) and was rescued by the UK government to the tune of £45bn? Some may remember Greenwich Capital (which RBS owned). And now we are supposed to "sell everything"?
To add to the "panic", we also have hedge funds piling into short oil trades in record numbers...
Source: @JKempEnergy
... and then there is madness like this hitting the press (apparently this was an error).
Source: @business
We increasingly hear investors talk about another "financial crisis", "global recession", etc. as negative sentiment nears extremes.

From a contrarian perspective, these trends look like a bounce in risk assets may be on the way (especially commodities and equities).
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Meanwhile, markets of energy producing nations continue to show investors' rising unease.

1. The Russian ruble is pushing toward record lows; will we see an 80 print this week? 
2. The Kazakhstani tenge was devalued again.
Source: Investing.com
3. Canadian government bond yields hit record lows.
By the way, a further decline in the Canadian dollar is vital if the oil patch is to survive the correction. It sits just above the marginal operating cost and desperately needs stronger oil or a weaker loonie.
Source: @markets, JPMorgan
The situation remains ugly in Brazil as share prices hit the lowest level since 2009.
The CDS spreads of commodity-exposed nations and companies indicate that the rating agencies are working overtime to prepare rapid-fire debt downgrades.  
Source: @fastFT
One of the scariest commodity firms these days is Noble Group. Apparently after the firm shed its agricultural commodities trading business, investors zeroed in on its "aggressive" accounting practices.
Source: Google
Speaking of commodities, platinum hit a 7-year low on Monday.
Source: Investing.com
Now a couple of quick notes on the Eurozone:

1. Here are the remnants of the Greek banking system. This is the Greek bank share index (tracked by FTSE). Note that this massive decline is only since October.
Source: Investing.com
2. Italians have been dumping bank bonds. As the Greek situation shows, bonds become the sacrificial lamb in a restructuring scenario (bail-in). So you hold bonds on the way up and equity on the way down. Might as well own contingent convertibles (CoCo bonds) - at least you get paid.
Source: @business
Polish bonds got hammered on the ratings downgrade (discussed yesterday).
Source: @fastFT
Finally, in another sign of heightened risk aversion, asset class correlations have risen significantly.
Source: @jsblokland
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Turning to Food for Thought, we have 5 items this morning:

1. With China's growth rate slowing, it may take significantly longer before the size of China's economy exceeds that of the US.
Source: @S_Rabinovitch
2. The Tsai Ing-wen victory in Taiwan (nation's first female president) is bringing to the surface the old tensions with China and may raise geopolitical risks in the region. The chart shows attitudes toward the various potential paths for Taiwan.
Source: ‏ ‏@business, Bloomberg.com
3. Twitter's top 5 markets.
Source: @conradhackett
4. States tightening unsustainable pension benefits of public employees.
Source: @PlanMaestro
5. Young people don't vote ...
Source: @TheFix, the Washington Post
Thanks to @NickatFP, @MattGarrett3, Josh, and Ycharts.com for helping with research for the Daily Shot.
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