Global Market Rout Spreads: VIX Marches Higher As China Stocks, Currency Plunge

Tyler Durden's picture

The global rout resulting from tensions over the North Korean nuclear standoff continued on Friday as world stocks tumbled for the fourth day, on course for their worst week since November following a third day of escalating verbal exchanges between Trump and Kim, as European and Asian shares tumlbed, volatility spiked, and the selloff in US futures continued albeit at a more modest pace as the escalating war of words over North Korea drove investors on Friday to safe havens such as the yen, Swiss franc and gold. In addition to North Korea, attention will be closely focused on today's US CPI print, which could result in even more currency volatility, should it surprise significantly in either direction.

"What has changed this time is that the scary threats and war of words between the U.S. and North Korea have intensified to the point that markets can't ignore it," said Shane Oliver, head of investment strategy at AMP Capital in Sydney. "Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a perfect trigger."

All eyes remained on the sharp short squeeze in the VIX, which exploded more than 50% above 16 on Thursday from single digits the day before - the highest print since Trump's election victory - and extended gains on Friday rising nearly 5% to 16.80, after briefly topping 17, a potential "margin calling" nightmare for countless vol sellers over the past year. Thursday also saw the highest VIX volume day on record as 937K VIX futures traded across the curve. The Global Financial Stress Indicator surged positive after trading in negative territory since April.

The global rout that sent the Nasdaq lower by 2% on Thursday, spread to China which saw the Shanghai Composite tumble by 1.6% to 3,208, its biggest drop this year, led by mining and resource stocks, with nearly 20 names halted limit down, after Chinese metals prices tumbled by 5%. The Chinese volatility index jumped by the most since January 2016 to its highest level in more than seven months.

While there wasn't a specific catalyst for the rout, a driver for the sharp commodity selling was the announcement by the China Steel Industry Association which said the recent surge in steel futures was not due to market demand but misunderstanding by some institutions. Adding fuel to the fire was a Reuters report that the Shanghai Futures Exchange told its members it may raise margins on steel rebar contracts if market trade volume is too large. As a result, metals also led declines on the mainland CSI 300 Index: Xiamen Tungsten slides as much as 9.3%, most intraday since September; Jiangxi Copper falls as much as 8.3%; China Molybdenum slips as much as 7.7%; the Bloomberg China Steel Producers Valuation Peers Index tumbled 5.9%, with Nanjing Iron & Steel, Maanshan Iron & Steel, Angang Steel dropping at least 6.9%.

"Chinese investors locked in profits on commodity shares following strong gains which had been driven by bets that capacity cuts would boost prices", said Helen Lau, Hong Kong-based analyst with Argonaut Securities. "Stock markets are in a risk-off mode due to escalating geopolitical risks, so recent outperformers would be the first to take a hit amid a selloff."  In HK trading Aluminum Corp. of China tumbles as much as 7.4%, the biggest intraday drop since February 2016, while China Shenhua Energy dropped as much as 4.8%, among the worst performers on Hang Seng Index.

Also hurting Chinese sentiment was the plunge in Tencent, with the Chinese tech giant dropping as much as 5% in Hong Kong, its biggest intraday decline in more than a month, following news of a Chinese probe into Tencent, Sina and Baidu for cyber-security law violations.  Stocks of related tech companies were all lower with Sina down 3%, Weibo down 4.5%, and Baidu down 2.5%.

Earlier in the session, the onshore Chinese yuan dropped as much as 0.43% vs USD to 6.7080, its biggest drop since Jan. 19, after the PBOC set the fixing at a weaker level than expected. As Bloomberg reported overnight, the PBOC strengthened fixing by 0.19% to 6.66420, compared with forecasts of 6.6477 from Commerzbank, 6.6552 from Mizuho Bank, 6.6559 from Scotiabank and 6.6549 from Nomura. At the same time, the offshore yuan dropped as much as 0.28% to 6.6853, most since June 26, although putting the drop in context, just one day earlier, the CNY rose to its strongest level since August 2016 on Thursday, prompting Bloomberg to call the Yuan the new "safe haven" currency.

Elsewhere in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan had skidded 1.55 percent, its biggest one-day loss since mid-December, to leave it down 2.5 percent for the week. Australia’s S&P/ASX 200 Index fell 1.2 percent at the close in Sydney. The Hang Seng Index in Hong Kong tumbled 2 percent and China’s Shanghai Composite Index was down 1.6 percent. The Japanese yen rose 0.2 percent to 108.96 per dollar, the strongest in more than 15 weeks. Japanese markets are closed for the Mountain Day public holiday.

South Korea's KOSPI fell 1.8 percent to an 11-1/2-week low, but its losses for the week are a relatively modest 3.2 percent; volatility on the Kospi 200 surged as much as 27 percent. "Pretty remarkable, perhaps even extraordinary, considering," said fund manager BlueBay strategist Tim Ash. The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month.

European markets continued sliding into risk-off mode although at a slower pace; even so Europe's where regional indices were set for the worst week of losses this year as sentiment on ongoing fears about escalation between the US and North Korea. Euro zone volatility jumped to the highest since April, when France's election was rattling the region.  Weakness has been seen across the board (Eurostoxx 600 -1.0%), however mining names have notably underperforming amid Chinese metal prices slumping by some 5% overnight. The iTraxx Crossover extended its recent widening, leading sentiment as hedges are placed into the weekend. European equity markets opened lower led by mining sector, as base metals sell off heavily in Asia after a report saying the Shanghai exchange may raise margins on steel rebar contracts, which was later confirmed. DAX futures dip to approach 200-DMA, financials under pressure after HSBC warns low-vol environment could hit 2H revenues.

CHF and JPY marginally outperform in G-10, EMFX weaker against USD across the board. Core fixed income extends rally and bund curve flattens further, yet UST/bund spread widens 3bps as USTs lag amid focus on U.S. CPI data which may add to the recent dollar pains should inflation come in weaker than expected.

U.S. treasury yields fell to their lowest in more than six weeks ahead of inflation data expected to show a pickup in price growth, which could boost the chances of a further rate hike this year, while the Fed’s Kaplan and Kashkari are due to speak. The dollar declined against the Japanese yen for a fourth day as North Korea tensions remained elevated. The yield on 10-year Treasuries fell one basis point to 2.19 percent, the lowest in more than six weeks. Germany’s 10-year yield decreased three basis points to 0.38 percent, the lowest in more than six weeks.

Oil was modestly higher even though the IEA cuts its OPEC demand estimates for this year and next year by by 400bpd after revising down its demand estimates going back to 2015, rejecting OPEC's own assessment of rising demand growth for the near future.

Aside from North Korea, inflation data is where the market is most sensitive to a surprise at the moment, even if yesterday's weak US PPI doesn't suggest an imminent rise. For the US CPI today, consensus expected core CPI inflation to rise +0.2%, and should finally snap its streak of four consecutive monthly misses which could be important. As recent Fed statements have emphasized, policymakers will be monitoring near-term inflation trends closely. Hence, an in line print would provide tentative evidence that the recent downshift in core inflation may be behind us.

New York Fed President William Dudley cautioned that it will “take some time” for inflation to reach the central bank’s 2 percent target, the latest official warning that price pressures remain muted. The Federal Reserve Bank Dallas President Fred Kaplan speaks this afternoon. Also today, Moody’s may publish a review of South Africa’s credit rating, two months after reducing its foreign- and local-currency assessments to one level above junk.  JC Penney, Magna International and Telus are due to release results. July consumer price data is also due later.

Bulletin Headline Summary From RanSquawk

  • Geopolitical tensions continue to act as a driving force for markets amid the latest exchange between the US and NK
  • This has seen downside in EU equities (Eurostoxx 50 -1.0%) and a FTQ in other assets
  • Looking ahead, highlights include US CPI, Fed's Kashkari and Kaplan

Market Snapshot

  • S&P 500 futures down 0.1% to 2,434.25
  • STOXX Europe 600 down 1.0% to 372.26
  • DAX down 0.3% to 11,980
  • MSCI ASIA down 0.8% to 158.49
  • MSCI ASIA ex JAPAN down 1.5% to 515.81
  • Nikkei down 0.05% to 19,729.74
  • Topix down 0.04% to 1,617.25
  • Hang Seng Index down 2% to 26,883.51
  • Shanghai Composite down 1.6% to 3,208.54
  • Sensex down 1.1% to 31,193.00
  • Australia S&P/ASX 200 down 1.2% to 5,693.14
  • Kospi down 1.7% to 2,319.71
  • German 10Y yield fell 3.5 bps to 0.38%
  • Euro down 0.1% to 1.1759 per US$
  • Brent Futures down 0.9% to $51.45/bbl
  • US 10Y yields unchanged at  2.19%
  • Italian 10Y yield rose 2.1 bps to 1.743%
  • Spanish 10Y yield fell 0.6 bps to 1.452%
  • Brent Futures down 0.4% to $51.70/bbl
  • Gold spot up 0.1% to $1,287.31
  • U.S. Dollar Index up 0.04% to 93.44

Top Overnight News

  • China Urges Restraint as Futures Slide; FOMC Voters to Speak After CPI Data; Snap Slammed Amid Facebook Pressure
  • The escalating war of words between Trump and North Korean leader Kim Jong-Un sent Asian markets tumbling as the region braced for more provocations from his regime next week
  • President Donald Trump stepped up his campaign of pressure on North Korea, warning the regime not to follow through with a missile test near Guam and promising massive response to any strike against the U.S. or its allies
  • Treasury yields may climb from a six-week low if Friday’s U.S. consumer- price data merely meet expectations, as the market is on high- alert for evidence that inflation is heating up and supporting the Fed’s case for higher interest rates
  • For all the talk that Chair Janet Yellen’s plan to shrink the Fed’s balance sheet will hurt Treasuries, U.S. mortgage bonds face a bigger test
  • The International Energy Agency cut estimates for the amount of crude needed from OPEC this year and in 2018, after lowering its historical assessments of consumption in emerging nations including China and India
  • All that stands between German Chancellor Angela Merkel and a fourth term is six weeks of campaigning
  • Morgan Stanley added its voice to a growing chorus of skepticism surrounding debt valuations, with Pacific Investment Management Co. writing in a report released Wednesday that investors should pare relatively expensive assets like corporate bonds in favor of safer investments like Treasuries
  • Credit Suisse Group AG is barring its traders from buying or selling certain Venezuelan securities and business as the political and economic crisis in the South American country intensifies
  • Gold advanced to the highest in two months as the spike in tensions between the U.S. and North Korea fanned demand, with hedge fund billionaire Ray Dalio flagging rising risks, including “two confrontational, nationalistic, and militaristic leaders playing chicken with each other”
  • President Donald Trump laid out a path for Senate Majority Leader Mitch McConnell to get back in his good graces: replace Obamacare, overhaul the U.S. tax code and find a way to pay for big infrastructure improvements
  • RBA’s Lowe says next interest rate move likely up, but could be some time away; RBA prepared to intervene in A$ in ’extreme’ situations
  • Snap, Blue Apron Fall Flat as the Incumbents Smash the Upstarts
  • IEA Cuts Estimates for Crude Needed From OPEC This Year and Next
  • Chinese Regulator Starts Probe Into Tencent, Weibo and Baidu
  • Stolen 1MDB Funds Are Focus of U.S. Criminal Investigation
  • Health Insurers Face Long Odds to Win Reprieve of Obamacare Tax
  • U.S. Stocks Gain, Hong Kong Loses Weight in MSCI Indexes: SocGen
  • FBI Says ISIS Used EBay to Send Cash to U.S.: WSJ
  • Anbang Ownership Secrets Subject of U.S. Workers’ Complaint
  • Hollywood Heads For Its Worst Summer Box Office in a Decade

Asia stock markets were heavily pressured amid continued geopolitical tensions after further fighting talk between US and North Korea, which also saw US indices close negative for a 3rd consecutive day. The fresh goading came from both sides as US President Trump suggested his fire and fury comments maybe was not tough enough and warned North Korea to get its act together or it will be in trouble like few nations have ever been. This evoked a response from North Korea which vowed to mercilessly wipe out the provocateurs and stated the US will suffer a shameful defeat. As such, ASX 200 (-1.2%), KOSPI (-1.7%) Hang Seng (-2.0%) and Shanghai Comp (-1.7%) all traded with firm losses, while Nikkei 225 was shut due to public holiday. PBoC injected CNY 70bln in 7-day reverse repos and CNY 60bln in 14-day reverse repos, for a net weekly drain of CNY 30bln vs. CNY 40bln drain last week.

Top Asian News

  • War of Words Between Trump and Kim Has Asia Bracing for Conflict
  • South Korean Banks Follow Won Lower Amid Rising Trump Rhetoric
  • China Data Dump and Alternative Gauges Both Signal Steady Output
  • Maker of India’s Aircraft Carrier Surges 22% on Trading Debut
  • Biggest India Lender Slumps as Bad-Loan Surprise Hits Profit
  • KKR Completes 26 Investments in China as of Aug. 1
  • Freeport Urged to Reinstate Workers to End Indonesian Strike
  • India July Local Passenger Vehicle Sales Gain 15% Y/y to 298,997
  • BlackRock’s James Lenton Joins Fidelity as Trader in Hong Kong

European indices are set for the worst week of losses this year as sentiment is weighed by the war of words between the US and North Korea. Weakness has been seen across the board (Eurostoxx 50 -1.0%), however mining names have notably underperforming amid Chinese metal prices slumping by some 5% overnight. EGBs supported by flight to quality with Bunds printing fresh session highs, while there had been reports of 5k lots tripping stops at 164.50. Peripherals underperform this morning, led by BTPs, subsequently the GER-ITA spread has widened to 162bps

Top European News

  • Morgan Stanley Makes ‘Multi-Year Call’ For Strong Euro on Reform
  • Europe Miners Slump as Metals Fall on China Steel Body’s Warning
  • Tullow Oil, Genel Energy Drop; GMP Cuts Both Stocks to Reduce
  • Old Mutual First-Half Profit Climbs as Insurer’s Split Looms
  • Merkel’s Bloc Holds All the Coalition Options in Latest Poll
  • Buy BNP Paribas, Credit Suisse; Sell Barclays, Goldman Says
  • Nordea Chairman Hints HQ Review Isn’t Limited to the Nordics

In currencies, safe-haven support for the currency has continued as USD/JPY made a brief break below 109.00 overnight. Although, with the war of words showing no signs of stopping, JPY could make a push back to the April low at 108.11. So far, the pair have traded in a narrow range with investor focus for the USD shifting to the US inflation figures due out later in the session. AUD softened in Asian trade as commodities prices slipped. Crude prices fell over 0.5%, despite Saudi Arabia and Iraq's announcement to ensure that all major producers comply to the OPEC production cut, while Saudi also left the door open to deeper cuts. Additionally, Chinese iron ore prices fell some 5%, further weighed on the currency, subsequently pushing AUD to the mid 0.78.

In commodities, China state run newspaper editorial comments state China will remain neutral if North Korea launches an attack on US, but if US strikes first and tries to overthrow North Korean government, China will stop them. Saudi Arabia Energy Minister Al-Falih stated the possibility for continuation of output cuts is on the table and if the size of cuts need to be adjusted, this will be examined and subject to approval by 24 countries. North Korea vows to mercilessly wipe out the provocateurs, says US will suffer a shameful defeat, according to North Korean state media. IEA raises 2017 global oil demand forecast to 1.5mln bpd vs. 1.4mln bpd, global oil supply rose by 520k, while OPEC compliance fell to 75%.

Looking at the day ahead, the main focus will be its inflation stats for July, with expectations at 0.2% mom (for core) and 1.7% yoy. Onto other events, the Fed’s Kaplan and Fed’s Kashkari will also speak today.

US Event calendar

  • 8:30am: US CPI MoM, est. 0.2%, prior 0.0%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
    • US CPI YoY, est. 1.8%, prior 1.6%; CPI Ex Food and Energy YoY, est. 1.7%, prior 1.7%
    • Real Avg Weekly Earnings YoY, prior 1.09%; Real Avg Hourly Earning YoY, prior 0.8%

DB's Jim Reid concludes the overnight wrap

I'm hoping I'll be on this planet for as close to 36,525 days as I can get and I'm also hoping tomorrow will be the only day of that stint that I'm stupid enough to be picking up a brand new car with no miles on it. So in some ways it's exciting and in some way it’s very annoying as I vowed never to waste money on a new car. The twins have forced the issue and I'll be figuratively setting light to wads of bank notes as I roll out the forecourt. I'm driving 80 miles to Poole to collect it and I'm setting off very early as I have to get back to make sure everything is ready at home for the new arrival. The excitement is building, I'm very nervous and hopes and dreams come in abundance with such a fresh start. Yes Liverpool kick off their season at lunchtime tomorrow and I need to make sure I'm back in time to watch it. Wish me luck.

The markets and more importantly the world is wishing for a bit of luck at the moment and a peaceful solution to the North Korean spat. The nuclear fallout from this week's high stakes geopolitical jaw boning couldn't completely unsettle markets on Wednesday but Thursday was a different story. We finally broke the 15 day run of sub 0.3% closes in either direction with the S&P 500 -1.45% after a day where the news we covered yesterday morning concerning North Korea's threat to attack Guam by mid-August increasingly spooked global investors as the day progressed.

Mr Trump then raised the temperature another notch late in the US session last night, saying his ‘fire and fury” comment earlier in the week “wasn’t tough enough” and that “things will happen to them (NK) like they never thought possible..” and has “declined” to rule out a pre-emptive strike on NK, noting “we’ll see what happens”, all of which helped the US close at the lows for the session and shatter the recent low vol environment. Given the previous record low vol run was 10 days in 1966, if I do live to be 100 I'm statistically unlikely to witness anything like what we saw in the 15 days before yesterday.

The S&P 500 had its worse day since mid-May this year when it fell 1.8%. Over at the Vix, the fear gauge broadly traded up most of the day and surged 44% higher to close at 16.04, which is actually the first day the index closed above 16 in CY2017. Across the pond, the Vstoxx was up 26% to 18.9, the highest level since April when Europe had heightened political risks in the run up to the French elections.

Investors pushed safe haven assets higher again, with gold up 0.7% to a 9 week high, the Swiss franc up 0.1% (was +1.1% the day before) and JPY/USD +0.8% higher. Over in European government bonds, changes in core yields were more tempered following the ~5bp fall the day before. Bunds fell 1bp (2Y: unch; 10Y: -1bps), with Gilts down 3bps (2Y: +0.3bp; 10Y: -3bps) at the long end of the curve, while French OATs were broadly flat (2Y: unch; 10Y: -0.5bp). Peripheral bond yields were up slightly across the curve, with Italian BTPs (2Y: +1bp; 10Y: +2bps) and Portuguese yields (2Y: -0.5bp; 10Y: +2bps) not sure whether they  were a flight to quality instrument or a high beta asset. Across the pond, the UST10Y fell 5bps yesterday (2Y -1bp) but is fairly flat this morning.

In Asia, markets have continued to fall. The Kospi recovered a little to be 1.6% down as we type, the Won/USD dipping another 0.2%. The Hang Seng fell for the 3rd consecutive day (-1.9%), with Chinese bourses down 1.1% to 1.6%. We also got a glimpse of what China might be thinking, with the Global times (English paper under the People's Daily) writing that China should make clear that: i) it will stay neutral if the US retaliates after NK launches missile that threaten American soil, but ii) if countries try to overthrow the NK regime, China will prevent them from doing so.

Moving on, if we can pull out attention away from the nuclear threat, inflation data is probably where the market is most sensitive to a surprise at the moment, even if yesterday's weak US PPI doesn't suggest an imminent rise. For the US CPI today, our economists expect core CPI inflation (+0.2% vs. +0.1%) should finally snap its streak of four consecutive monthly misses which could be important. They also remind us that as recent Fed statements have emphasized, policymakers will be monitoring near-term inflation trends closely. Hence, an in line print would provide tentative evidence that the recent downshift in core inflation may be behind us.

Following on the theme of inflation, DB’s Luzzetti examined the impact of recent US dollar depreciation on the inflation outlook. Based on their own inflation models and analysis cited by Fed officials, they think that recent dollar weakness – assuming that it does not reverse – could lift year-over-year core PCE inflation by about 0.2pps by mid-2018 and 0.1pps by mid-2019. More details here.

Turning to Europe, the flip-side of recent currency moves is discussed by DB’s Mark Wall who has written on how euro appreciation will be balanced against growth momentum in determining the ECB’s exit from QE. He argue that all else unchanged the euro’s appreciation since June could reduce the ECB staff core inflation forecast for 2019 from 1.7% yoy to 1.5% yoy. More details here Returning to the equity market sell-off in a little more depth, US bourses all weakened yesterday, with the S&P (-1.5%), the Dow (-0.9%) and the Nasdaq (-2.1%) sharply lower. Within the S&P, only the utilities sector was up (+0.3%) versus larger losses elsewhere (IT -2.2%; Financials -1.8%). European markets also fell across the board, the Stoxx 600 was down 1% to the lowest level since March with all sectors in the red. Across the region the FTSE 100 (-1.4%),  the DAX (-1.2%), Italian FTSE MIB (-0.8%) and CAC (-0.6%) were all lower.

Currencies were mixed but little changed, the USD dollar index dipped 0.2% post the lower than expected PPI data. The Euro continued to edge ahead against the USD and Sterling, up 0.1% and 0.3% respectively, while the Sterling/USD was down 0.2%. In commodities, WTI oil fell 2%, despite OPEC raising its demand forecast for oil and two of the largest OPEC producers (Saudi Arabia & Iraq) agreeing to strengthen their commitments to production cuts. Notably, Iraq's recent compliance to production targets is not exactly great (29% in July).

Elsewhere, precious metals were modestly up (Gold +0.7%; Silver +1%) and aluminium continues to gain (Copper -0.3%; Aluminium +0.9%). Agricultural commodities were broadly lower, with corn, wheat and cotton all down ~4%, while soybeans, coffee and sugar were down ~3%. This follows a USDA report which suggest US farmers will produce more corn and soybeans than analyst forecasts.

Away from the markets, Trump has made his disappointment with Senate majority leader McConnell well known, tweeting “can you believe that McConnell, who has screamed repeal & replace (Obamacare) for 7 years, couldn’t get it done…” and “…Mitch, get back to work…”. However, Trump was more conciliatory on special counsel Mueller, saying he “hasn’t given it any thought about firing Mueller” and that “I’m not dismissing anybody”. Elsewhere, NY Fed president Dudley cautioned that it will "take some time" for inflation to reach the Fed's 2% target, which is consistent with comments made by his colleagues earlier in the week.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the July PPI report was softer than expected. The core measure (ex-food & energy aggregate) was -0.1% mom (vs. 0.2% expected) and 1.8% yoy (vs. 2.1% expected). The PPI for healthcare services, which is closely correlated with that within the PCE deflator, rose a steady 1.4% yoy. Elsewhere, claims data were mixed, with initial jobless claims up 3k to 244k (vs. 240k expected) and continuing claims at 1,951k (vs. 1,960k expected). In Europe,France’s June industrial production (IP) was modestly lower than expectations at -1.1% mom (vs. -0.6% expected, 1.9% previous) and 2.6% yoy (vs. 3.1% expected), while manufacturing production was slightly better at -0.9% mom (vs. -1% expected) and 3.3% yoy (vs. 3.2% expected), which is just a bit weaker than Markit PMI readings had foreshadowed. Over in UK, IP for June was higher than expectations at 0.5% mom (vs. 0.1% expected) and 0.3% yoy (vs. -0.1% expected), while June manufacturing production was flat and in line, at 0% mom and 0.6% yoy. The UK’s trade deficit also unexpectedly widened in June as exports fell but imports rose.

Looking at the day ahead, the final CPI figures for Germany (1.5% yoy expected), France (0.8% yoy expected) and Italy (1.2% yoy expected) will be released. Over in the US, the main focus will be its inflation stats for July, with expectations at 0.2% mom (for core) and 1.7% yoy. Onto other events, the Fed’s Kaplan and Fed’s Kashkari will also speak today.

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Fake Trump's picture

Thanks Trump Fire & Fury Black Swan. This Black Swan is really angry. 

nmewn's picture

Inquisitor Mueller needs to subpoena this black swan immediately in order to find out under oath what she knows & when she knew it! She knows something!

Perhaps offer a plea deal to her little ones, maybe they'll roll on her ;-)

AR15AU's picture

Happy Swanukkah everyone!

 

Got gold?

Nobodys Home's picture

Under no circumstances should her security clearance be withdrawn!!!!

Cangaroo.TNT's picture

After ZH carrying on for years about how the market is in a bubble it's kinda disappointing to see ZH blame this on the Korea situation.  I think Mish has a much better take on it:

Stock Market Correction Hasn’t Begun to Begin! It Will (And North Korea Has Nothing to Do With It)

https://mishtalk.com/2017/08/10/correction-hasnt-begun-to-begin/

GUS100CORRINA's picture

Global Market Rout Spreads: VIX Marches Higher As China Stocks, Currency Plunge

My response: I find it amazing how everyone is looking for a SCAPEGOAT in latest market rout. However, if one takes the time to look at the market internals and valuations, this market is overcooked, overstimulated and overvalued far beyond anything reasonable.

It will be interesting to see how everyone comes to terms with the fact that the entire market is one GIANT computer generated fantasy with bad CENTRAL BANK monetary policy, GREED and CORRUPTION at the center of it all.

No one even seems to care at all about DEBT levels and other ECONOMIC metrics. This most probably will NOT end well.

TheSilentMajority's picture

The key question, all that really matters is, will the SNB print money from thin air and buy everything heavy today?

AR15AU's picture

SNB bagholders: gonna need a bigger bag... US stawks could shed 80 billion in market cap in an hour ;) 

GodHelpAmerica's picture

Heh. But you underestimate the central bankers desire to inflate away the debt...

What is the SNB seeing?

The world's reserve currency cannot become the next yen. To go Japanese the US would first have to forfeit its hegemonic privilege...

GodHelpAmerica's picture

Central bank officials to start jawboning in 3...2...1...

The next crisis IS an existential one in terms of the status quo of the financial system. Do not fool yourself--the debt, globally is astronomical and persistent inflation is the only politically palatable way out. Expect central bankers to double down on their monetary experiments imminently...

The deflation of this bubble is the END; so no matter which way you slice it, it is inflation that will get us to the other side....the currencies must adjust significantly to the downside.

Nominal versus real was never more relevant than it will be going forward...

currentsea's picture

green by noon.  vix sub 12.

TheSilentMajority's picture

Agreed.

The SNB will not permit any significant prolonged declines.

The SNB will be printing extra billions of cash from thin air to wipeout any shorts and ensure a bid.

zebra77a's picture

Sure and everytime they water their fiat, cryptos grow like roundup resistant weeds.. . They have already painted themselves into a corner and their only plan now to get out is to blow a hole in the wall and start WWIII..

gregga777's picture

Big stick ideology, big stick diplomacy, or big stick policy refers to U.S. President Theodore Roosevelt’s foreign policy: "speak softly, and carry a big stick." Roosevelt described his style of foreign policy as "the exercise of intelligent forethought and of decisive action sufficiently far in advance of any likely crisis."

"Intelligent forethought!" That's a concept that the American Intellectual Yet Idiot classes ruling MORONS should thoughtfully study and try to emulate. But, maybe that requires far too much thinking for people with addled and developmentally disabled brains (aka RETARDS).

MonsterSchmuck's picture

Pearl Harbor.
Some forethought it was!
Pressuring Japan into a
premtive strike was his aim and
explains a lot about that day.

Nobodys Home's picture

Don't worry. It's only a flight of B-17s coming in from the mainland.

MonsterSchmuck's picture

Damn, can't get that one back.
Teddy ain't FDR.
Blew right passed that and
the Big Stick. My bad.

MonsterSchmuck's picture

My guesd is that this
Entire North Korea saber
rattling is a play by Trump
against China.
If so, using the dangerous
and dysfunctional nuclear
armed state againt China
if done properly can be brilliant.
China desreves to be seen
for the jag-offs they are and
Pressuring them to deal with
the mess they created on
the Korean penninsula is
the right thing to do even
though it scares the shit out
of the safe and stable at all
cost historically ignorant and
Anti-Western cuck sellouts
who approve of appeasement
And kicking the NK can down
the road for another generation
to deal with some Indigestion.
Another MAGA move.
It' also wiped Russia collusion
BS off the screen, it makes
the previois admins look weak
For their policy failures and
distracts the MIC from their
Anti-Trump supprting activities
By giving them a chubby that
Maybe he's their warmonger
after all and puts the brakes on
the economic bubble doom we've
Been pumped with.

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a perfect trigger."

You can't build skyscrapers in
NYC without dealing with all
the shady, corrupt business',
unions, mob and city/state
politics. Trump has skills and
The worst thing his enemies
can do is underestimate him
which they can't help but doing
because they're awful people.

Tugg McFancy's picture

I bet Raytheon ain't laying an egg.

MK13's picture

How about entire NK saber rattling is about focusing attention away from Russian idiocy?

Robert Trip's picture

The "Retarded Green Beret" is writing all of Kim's supposed dialogue.

 

Nobodys Home's picture

Probably all pre-planned theatrics.
NK rattles the sabre every so many years. I'd suppose the timing is pretty predictable by now.
You stop miritary exercise and Give FOOD NOW or we brow you up!!!!

Why not use it for political gain?

Latitude25's picture

Going short gold

Let it Go's picture

Behind all this market action is the fact that the financial missteps in China have continued. China is no small underdeveloped backwater with an insignificant economy and it is important to remember that "what happens in China does not stay in China." Growth in China has been fueled by its government expanding the money supply and debt, that is distorting markets across the world.

This extends to things like causing housing prices to soar in many parts of Canada. This is why it is so baffling that many economists have chosen to ignore or given a pass to the ramifications of China's policies as they affect the big picture. More on China's economy below;

 http://brucewilds.blogspot.com/2017/07/chinas-financial-missteps-continue.html

Gohigher's picture

Xi
8-6-2017

"The world is on the verge of radical change. We see how the European Union is gradually collapsing, as is the US economy -- it is all over for the new world order. So, it will never again be as it was before, in 10 years we will have a new world order in which the key will be the union of China and Russia. "

http://www.fort-russ.com/2016/08/china-openly-offers-russia-alliance.html

Did I miss this here, or did ZH not even cover it favoring click-stories ??

DaBears's picture

You mean the same alliance Where CCP stabbed Ruissa in the back after 35 years of support?

Trade Maiden's picture

Ive also read Forex Kong is moving HEAVILY into Canadian Marijuana Stocks. This guy nails it - often.

https://forexkong.com/canadian-marijuana-stocks-investing-in-marijuana/