China Pulls The Rug From Under Europe, Halts French Bank Transactions, Makes Good On Trade War Ultimatum
A flurry of headlines out of China suggest global macro-economic volatility may be ready to take it to the next level. We discussed last week how China's oh-so-generous offer of help to Europe was merely a veiled threat playing US against Europe in a game of who-gets-the-funding. Well, tonight, it seems, they are making good on some of those threats. Aggravated by EU's lack of market economy recognition, they pull trading lines with French banks, express concern at the EUR's safety (preferring US Treasuries), and indicate a clear preference for bonds over stocks - all the while warning of growing trade tensions - consider the sabre-rattled.
France is in big big big trouble. All of Europe is really.
A big market-making state bank in China's onshore foreign exchange market has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, two sources told Reuters on Tuesday.
The European banks include French lenders Societe Generale , Credit Agricole and BNP Paribas.
"Apart from spot trading, all swaps and forwards trading (with the European banks) have been stopped,"
``Good news`` for the US.
China, the largest foreign holder of U.S. government debt, will keep buying U.S. Treasuries, the official People's Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing government researchers.
But don't fool yourself into believing them. Art of War my friends, Art of War.
Wang Chaocai, a Ministry of Finance researcher, was quoted as saying that "what else we can buy if not U.S. Treasuries? It's more risky to buy into equities."
You can buy gold...
Time to print ECB! Or let the big banks fail, which will be epic... since the banks are bigger than almost every country in the EU they are in.
Switzerland is the worst, with banks holding 594% of GDP in assets... good luck bailing them out...
UPDATE :
Well apparently it didn't take long for the US to respond to protect their friends in the EU...
U.S. to announce China trade enforcement action
U.S. trade officials will announce a major trade enforcement action against China on Tuesday, according to an advisory from the U.S. Trade Representative's office.
The advisory, which was obtained from a business group, said U.S. Trade Representative Ron Kirk "will hold a press conference to announce a major trade enforcement action against China." It gave no other details.
That means imported stuff from China will be more expensive.
Of course they gonna say ``it's good for jobs``. It will be... in the long term, if they do it correctly. But considering how a failure congress is, forget it.
Begun the trade war has.
Update 2 :
The ONLY important factor in this is this : What were the size of the swaps they were typically doing. If they were big, well Europe is pretty much done.... this is very very very very bad. Aka all the banks targeted are gonna BLOW UP... some of them THIS WEEK probably.
But IF the swaps were small, no biggie. But still not a good sign, since FX swaplines are among the most secure credit there is out there... that means China doesn't believe in Europe at all. They think they won't get paid back...
But the funniest thing about all this is that China is in a big bubble too and their banks are in big trouble too!
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