All we know is the PBoC went ahead on the regularly scheduled Tuesday (tonight) and injected $13 Billion Yuan through a 7-day reverse repo which is close to the last operation on Tuesday October 15th for 10 Billion Yuan; this led to an early +1.2% gain in the SHCOMP, but that faded.
As a result banks in Shanghai soared with gains from 2.1 to over 5% with many of the larger banks around a 4% gain on the injection news. Still Asian markets were in the red on poor earnings and nervousness in China over the announcement of some key reforms.
Some early analysis suggests soaring money market rates over fears of a money shortage prompted the PBoC to take action. Last night's (Monday) overnight repo rate jumped 8 basis points to 4.56% while the more important 14-day repo rate soared 50 basis points Monday night to 6.4%, if memory serves me correct, the 7-day repo rate was at 4% last Wednesday.
It's difficult to see any specific market's effected significantly by the injection, the $AUD did fall around the same time as the injection, but as posted tonight, 3C has been forecasting $AUD weakness so I don't know if it's coincidental as the $AUD continues a small downtrend from 10/22.
As an aside, as I look at the $USD (which appears to be unmoved), it looks very ripe for a bounce higher, that will likely fuel or gold pullback, how it effects oil though is unknown as crude as stronger today in the face of a stronger $USD, stocks generally should also pullback.
All of the carry pairs were down at that moment and have continued slightly lower iincluding the USD/JPY, AUD/JPY and EUR/JPY, this is mostly a result of a stronger Yen.
All US futures are slightly in the red or just about even since the 4 p.m. print.
Putting on my tinfoil hat, we know that China desperately needs liquidity and credit growth to fuel their GDP so cutting liquidity injections was not a simple task, however the hot-money flows from Japan's QE-Zilla and the F_E_D's as well as a number of other CBs around the world (I believe there have been something on the order of 550 Central Bank loosening actions worldwide since 2008) have created problems such as the 12% 1-week rise in real estate in Hong Kong (I believe it was) and 69 of 70 cities seeing real estate rise y.o.y. in China, this is largely do to hot money flows from outside China because of lose monetary policy in other countries.
I HAVE to at least wonder if China's tightening just a couple of week's before the F_O_M_C (enough time for 3 reverse repos to be withheld and just enough to send a message) was actually what the PBoC was doing.
If so, then the resumption of liquidity injections the same day the F_O_M_C meeting starts makes me wonder if all the pundits who are forecasting anything from no October tapering to QE through 2015 and even a $15 billion dollar monthly increase in asset purchases are perhaps as dead wrong as they were about the September taper they all expected?
It is possible, however unlikely that the F_E_D (which many have noted Bernie has been conspicuously quiet of late which is strange for the most transparent F_E_D in history) that Bernie may have given China some assurances as they resume their open market operations. I know it's left field, but the thing we tend to fail at as humans when it comes to imagining the possibilities of future realty is our LACK of imagination, this was one of the primary failings in events such as the sudden and unexpected collapse of the Soviet Union and the 9-11 tragedy so I'll go left field just to balance out some of the wildly dovish right field pundits as "Devil's Advocate ONLY", this IS NOT my objective analysis.
Other than that, it's pretty quiet right now around 1 a.m.
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