On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan. The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world. If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history. So what just happened in Japan is a really big deal. The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory. Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015. As I stated yesterday, this is what a global financial crisis looks like.
Just as we saw during the last financial crisis, the big banks are playing a starring role, and this is definitely true in Japan. Right now, Japanese banking stocks are absolutely imploding, and this is what drove much of the panic last night. The following numbers come from Wolf Richter…
– Global Risk-On Euphoria: Japan’s Nikkei Soars 7.7%, Biggest One Day Move In Seven Years; Futures Surge (ZeroHedge, Sep 9, 2015)
– An Inside Look At The Shocking Role Of Gold In The “New Normal” (ZeroHedge, Dec 5, 2014):
You thought gold was “only” for wealth preservation? You ain’t seen nothing yet.
– BoJ Invisible Hand (Briefly) Rescues Nikkei From Sub-15,000 Plunge (Again) (ZeroHedge, Oct 12, 2014):
UPDATE: That didn’t last long… NKY back under 15k as JPY collapses
Heavy volume selling in Nikkei futures at the open sent the index down over 200 points and broke the oh-so-crucial 15,000 line. It appears – just as in August that 15,000 is the BoJ’s line in the sand as a miracle buyer turned up and lifted the index all the way back to 15,000 (whiule JPY remained lower and US futures saw no bounce). Of course, for those who prefer to ignore the fact that the BoJ is almost the biggest holder of Japanese stocks in the world and bought more stock ETFs than ever before in August, this is a clear signal of BTFD’ers back to save the world. For the rest of the sane rational fact-checking market participants, that ‘know’ the BoJ’s trigger to buy is a weak morning session, we wonder how much of this futures ramp is front-running… that will fade as JPY is not supportive at all.
– Japocalypse Wow – Foreigners Dump Most Japanese Stocks Since 2010 (ZeroHedge, Feb 6, 2014):
It would seem, in the case of momo-chasing levered fast-money flows, that Propertius was correct – “fickleness has always befriended the beautiful…” and Japanese stocks are no longer the once beautiful trend that Abe had promised them to be. A tapering of the US flow; a ripple across the bow of emerging markets; and suddenly Kyle Bass’ sarcastically-named “macro tourists” are running for exits as Shakespeare himself once wrote, “was ever feather so lightly blown to and fro as this multitude.” Historical quotations aside, the last time flow swung so violently negative, the Nikkei ended up losing 55% in the next 18 months. We love the smell of nay-sayers in the morning…
– The Stock Market In Japan Is COLLAPSING (Economic Collapse, Feb 4, 2014):
Did you see what just happened in Japan? The stock market of the 3rd largest economy on the planet is imploding. On Tuesday, the Nikkei fell by more than 610 points. If that sounds like a lot, that is because it is. The largest one day stock market decline in U.S. history is only 777 points. So far, the Dow is only down about 1000 points during this “correction”, but the Nikkei is down more than 2,300 points. The Nikkei has dropped more than 14 percent since the peak of the market, and many analysts believe that this is only just the beginning. Those that have been waiting for a full-blown stock market collapse may be about to get their wish. Japan is absolutely drowning in debt, their central bank is printing money like crazy and the Japanese population is aging rapidly. As far as economic fundamentals go, there is very little good news as far as Japan is concerned. So will an Asian financial collapse precede the next great financial crisis in the United States? That is what some have been predicting, and it starting to look increasingly likely.
What happened to the Nikkei early on Tuesday was absolutely breathtaking. The following is how Bloomberg described the carnage:
– Japan Is Re-Crisis-ing; Nikkei Plunges 300 Points From US Close; S&P’s Dead-Cat-Bounce Dead (ZeroHedge, Feb 4, 2014):
US and Japanese stocks began to fall the moment the bell rang in NYC on the end of the US day-session. By the times futures closed 15mins later, the S&P had already lost 6 points and the exuberance in the Nikkei had snapped back to USDJPY reality (100 points off its highs). As the evening progressed the dead-cat-bounce died with US and Japanese stocks tumbling to day-session lows. Dow futures are down 110 from the highs; S&P futures are down 16 points from the US session highs; and Nikkei futures – not helped by the 19th month in a row of falling YoY base wages – are testing 14,050, having dropped 300 points from the highs and removed all day-session gains. Stocks are re-crisis-ing as USDJPY tests back towards 101.
– Japanese Stocks In Freefall – TOPIX Plunges Almost 5% To 4-Month Lows; Nikkei Down 15% In 2014 (ZeroHedge, Feb 3, 2014):
UPDATE: USDJPY has re-tumbled back below 101.00, recoupling with S&P 500 futures from the tried-and-failed attempt to ramp stocks overnight. It seems the short-JPY-driven carry traders have backed away from risk for now, no matter how much the BoJ primes the pump.
Nikkei futures are under 14,000 and down 15% from Dec 31st highs.
Despite the hope-driven exuberance exhibited immediately post the Abe/Kuroda show, the USDJPY-pumping stock-momentum fest has ended – abruptly. Japan’s Nikkei 225 has lost all its gains and is now trading below US day-session lows (3-month lows) but it is the broader TOPIX index (more akin to the S&P 500) that is collapsing. Down almost 5% on the day (its biggest drop since the May collapse), the TOPIX is at 4-month lows. The TOPIX Real Estate index just hit a bear-market – down 20% from Dec 31st highs. Japanese sell-side shops are in full panic desparation mode as “suggestions” that a sub-14,000 Nikkei will prompt an acceleration of Japan’s QQE money-printing idiocy. This is getting ugly fast.
– USA: Uncle Sam is Dead (ToTheTick on Oct 8, 2013):
Isn’t it wonderful how the US believes (whether that be the citizens or the politicians) that the state will never default on its debt repayments? It’s the unfailing belief that your country will pull through and anyone that says otherwise is always either shouted down or told to go elsewhere. It’s all well and good having the belief that you will come out tops. But, the times of the US being at the top of the roost are well and truly over today. We should be playing the funeral march as Obama leaves office for all the debt that has been piled onto the country rather than the Star Spangled tune. The Stars just aren’t that spangled anymore, are they? Unprecedented debt, a budget that isn’t going to get passed, two sides that are playing a stand-off, a country that is held hostage, a debt rating that will be reduced and the Chinese and the Japanese that are now pointing the reprimanding finger.
When the US defaulted on their payments for their mortgages, they got called into the banks and had their houses repossessed back at the start of the financial crises. They were living on credit then and they still are. Obama should get the first plane to Tokyo and then fly on to Beijing. He will be needing to sign a few papers before he hands over the Good Old US of A to the Asians. Uncle Sam is dying a slow and painful death. A death by debt that has shot through the roof of the White House.
Uncle Sam is dead!
– FOMC Impact So Far: Nikkei -725 Points, Dow -570 Points (ZeroHedge, June 20, 2013):
But, but, but… the rally was all about earnings and fundamentals… not the Fed, right?
– Japanese Stocks Extend Overnight Plunge – Down Over 14% From Highs (ZeroHedge, May 27, 2013):
As if the overnight session in Japan was not bad enough, futures markets are indicating yet more weakness from the market that seemed (until 3 days ago) incapable of falling. With a 14.3% drop from its May 22nd highs, Japan’s Nikkei 225 is struggling to find buyers for this dip. What is interesting is the bid for European peripheral debt and equity markets this morning and the bounce in US futures (with no commensurate move in JPY which is hovering around 101). Gold and Silver are up around 1% with the USD unchanged. Treasury Futures imply a rise of 1-2bps in yield.
and just as the NKY saw its blow-off top, now US equities are ignoring the drop (for now)…
– Despite ‘Promises’, Japanese Market Chaos Continues (ZeroHedge, May 24, 2013):
UPDATE 1: Japanese stocks turned negative (NKY -600pts from highs, -1.5% on day; and TOPIX down over 4% from highs); Japanese banks -11% from yesterday highs; S&P futures down 10 points from after-hours highs…
UPDATE 2: *KURODA WANTS TO AVOID INCREASING VOLATILITY IN BOND MARKET (yeah thanks… as useful as saying “we all want to avoid syphilis”)
UPDATE 3: Nikkei 225 Drops below 14,000 – TOPIX down 11% from highs
For the second day in a row, and in spite of comments from Abe and Kuroda on communicating with the market (as Kuroda says BoJ Monetary easing sufficient), Japanese capital markets are out of control.
– Bank Of Japan Head:”No Bubble Here” As Nikkei Rises 45% In 2013 (ZeroHedge, May 15, 2013):
Take a good look at the chart of the Nikkei below:
Supposedly this is the same chart that the new BOJ head, Haruhiko Kuroda, was looking at when he was responding to Japanese lawmakers during a session of the upper-house budget committee, where he flatly rejected an opposition-party member’s argument that the recent rapid rise in the Tokyo stock market is out of line with Japan’s real economy. “At this moment I do not think they are in a bubble,” Kuroda said. And everyone believes him, just Because central bankers are so good at objectively observing how contained subrpime is big the asset bubbles their ruinous policies create.
Incidentally, all this happens as the Nikkei225 closed at 15096, and is up 45% in 2013 alone! It will easily surpass the Dow Jones Industrial Average in absolute terms once tonight’s trading session begins, considering the ongoing pounding the Yen is sustaining in today’s session.
From the WSJ:
– Tepco Shares Close Down Record 27.6% After Talk Of Bankruptcy (Business Insider, June 6, 2011)
– Japan’s TEPCO shares plunge 20% to new low (AFP, June 8, 2011):
TOKYO — Shares in Japan’s TEPCO hit an all-time low Thursday, falling 20 percent on uncertainty over government plans to ensure the company can meet compensation bills over the crisis at its nuclear plant.
Shares of the embattled Tokyo Electric Power (TEPCO) fell to 160 yen by noon, after hitting a new intraday low of 159 yen.
The shares have lost more than 90 percent of their value since the day before the March 11 earthquake and tsunami, which crippled cooling systems at the Fukushima Daiichi nuclear plant, triggering reactor meltdowns.
– Tepco Closes Down 27.6% — Its Worst Day Yet — After Talk Of Bankruptcy (Business Insider, June 6, 2011):
Tokyo Electric shares fell a record 27.6 percent today on talk of bankruptcy. Since the March 11 earthquake, Tepco shares are down 90 percent.
The head of Tokyo Stock Exchange, Atsushi Saito, was quoted as saying he thought Tepco should go through a court-led restructuring. An exchange spokesman explained that this was Saito’s personal opinion, according to Reuters.
With Tepco crashing, the Nikkei average closed at an 11-week low.
Meanwhile more trouble at Fukushima. Radiation jumped to record levels at reactor No. 1 and pools of radioactive water are on the verge of flooding.
And the real crisis has only just begun:
In other news:
– Japanese shares slide again on reactor deterioration (ABC News)
It appears the earlier speculation by PTI that the BOJ would inject ¥13.8 Trillion in the market to preserve asset prices was a little premature. The BOJ just released the official number and it is a measly ¥5 trillion.
And by measly we mean US$63 billion. Add this to the ¥28 trillion already deployed by the BOJ and get an even more modest ¥33 billion, or roughly $420 billion, which is the cost to preserve the Nikkei from plunging for a 4th consecutive day.
Yet even with this latest injection, the Nikkei is down almost 4% as of this writing. Should headline newsflow from Fukushima deteriorate, we anticipate that the full PTI number will be not only reach by surpassed very promptly as no amount of taxpayer capital will be deemed too great to preserve the wealth of those invested in Japanese stocks.
The Bank of Japan on Thursday offered to inject a further 5 trillion yen ($61 billion) into the banking system, continuing its effort to calm markets in the wake of the yen’s spike to a record high against the dollar.
That came on top of a total of 28 trillion yen already offered in same-day operations this week in the aftermarth of last Friday’s devastating earthquake and tsunami.
– Japanese Market Plummets 20% in 2 Days on Radiation Threat (Business Insider):
The Nikkei slid 14% last night (3/15/11), and recovered 3% to end net 11% down for the day after the Japanese government banned brokerages from selling. This was after a 6% down day on 3/14 and a poor prior week.
Both the TOPIX and the Nikkei are now down more than 20% for the year on the risk that nuclear radiation will pose a threat to Tokyo.
* TOPIX, Nikkei hit 2-yr lows, hedge funds lead way
* More than $700 bln in market cap lost in 2 days
* TSE volumes hit record for second day running
* Yen falls and later recovers on intervention talk
* Insurers seen selling bonds, yields rise despite stock
TOKYO, March 15 (Reuters) – Japanese stocks plunged 10.6
percent on Tuesday, posting the worst two-day losing streak
since 1987, on reports of rising radiation near Tokyo,
suggesting any deterioration at a quake-hit nuclear plant could
trigger more panic selling led by hedge funds.
The yen tripped on talk of intervention and bond yields rose
as investors sold debt to offset losses in the stock market. The
scale and speed of the equity selloff, on record volume for a
second day running, forced fund managers to sit on the
– Fears of meltdown with fuel rods ‘fully exposed’ at Japan reactor (Sydney Morning Herald)
– Meltdown alert at Japan reactor (BBC NEWS):
Technicians are battling to stabilise a third reactor at a quake-stricken Japanese nuclear plant, which has been rocked by a second blast in three days.
The fuel rods inside reactor 2 at the Fukushima Daiichi plant have been fully exposed on two separate occasions, raising fears of a meltdown.
Sea water is being pumped into the reactor to try to prevent overheating.
A cooling system breakdown preceded explosions at the plant’s reactor 3 on Monday and reactor 1 on Saturday.
The latest hydrogen blast injured 11 people, one of them seriously. It was felt 40km (25 miles) away and sent a huge column of smoke into the air.
The outer building around the reactor was largely destroyed.
Japanese Nuclear Crisis Escalates
Japan is racing against time to prevent a potential nuclear disaster after a third reactor at the quake-stricken power plant north of Tokyo went into meltdown on Monday.
Engineers have been battling for three days to prevent a nuclear disaster at Tokyo Electric Power’s Daiichi plant in Fukushima. But they have faced successive setbacks trying to cool down three reactors whose cooling systems were damaged after Japan was struck by a devastating 8.9 magnitude earthquake and tsunami on Friday.
The International Atomic Energy Agency on Monday evening said Japan had requested “expert missions” to help tackle the escalating nuclear crisis.
Tepco said elevated radiation levels were detected nearby after water levels at reactor No. 2 fell dangerously low for several hours. Early Tuesday morning in Japan, Tepco said coolant water inside the No. 2 reactor fell dangerously low for a second time on Monday night, leaving its fuel rods completely exposed
In the first full day of trading since the earthquake, Japan’s equity market reacted violently even as the Bank of Japan announced it would inject a record Y21,800bn ($265bn) in funds to financial institutions. The Nikkei plunged 6.2 per cent, its biggest drop in more than two years.
TOKYO (Reuters) – A massive selloff on the Tokyo Stock Exchange wiped out some 23.5 trillion yen ($287 billion) from the market’s value on Monday with investors dumping stocks as the country recoiled from a devastating earthquake and struggled to avert nuclear disaster.
The selloff triggered record volumes and slashed the market’s value to roughly 289 trillion yen.
The Nikkei average tumbled 6.2 percent, its biggest decline in a single day since October 2008, and more than 4.88 billion shares changed hands on the exchange’s first section, the highest number since World War 2.