Business

Less than two months ago, on November 16, Goldman released its list of top trades for 2016, #1 of which was the infamous long USDJPY, short EURUSD equial-weighted basket which has led to massive losses for anyone who has since put it on. At the current rate of carry trade unwinds, we expect that this trade will be closed out shortly, and may have been overnight when the USDJPY plunged to the lowest since the ETFlash crash.

But while we wait, here is a reminder what the #6 top trade for 2016 was:

• David Bowie, musical legend behind Ziggy Stardust, dies at 69 from cancer (Reuters)
• With No Powerball Winners, Jackpot Grows to Estimated $1.3 Billion (ABC)
• Stock Gains Short-Lived as Chinese Volatility Hurts Oil, Metals (BBG)
• China's yuan spikes higher, but stocks tumble (Reuters)
• Yuan Loan Rates Soar in Hong Kong as PBOC Halts Currency's Slide (BBG)
• China stocks close down at lowest level since September (Reuters)
• Arch Coal Files for Bankruptcy (WSJ)
• Fed Eyes Margin Rules to Bolster Oversight (WSJ)

Once again, China was faced with the unpleasant task of deciding which asset class to intervene in: its plunging stock market, or its currency. It chose the latter, and as a result after a turbulent start the Shanghai Composite sank by 5.3% to close just above 3000 and down 15% in just the past 11 days, suggesting that the PBOC is increasingly seeing the CNY1.8 trillion (at least) spent to stabilize stocks as a sunk cost.

China have suspended their banks from the Foreign Exchange markets and ordered them to stop buying U.S. Dollars.  China’s foreign exchange regulator has ordered bank’s to limit the purchases of U.S. dollars for at least one month in an attempt to stem capital outflows. Superstation95.com reports: The move comes as China reported its biggest annual drop in foreign exchange reserves on record in 2015, while the central bank has allowed a sharp slide in the Yuan currency to multi-year lows, raising fears of more capital flight.

"Our balance sheet - the strongest in recent history - represents a significant advantage as we continue to identify high value growth opportunities across the products and geographies we operate in. Maintaining our investment grade rating with the international rating agencies is a vital part of this strategy."

      - Noble Group 2014 Annual Report, p. 27

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