Yuan

"Of all the possible risk scenarios the meltdown scenario is, realistically speaking, the most likely to occur. It is actually a more realistic outcome than the capital stock adjustment scenario. If China’s economy, the second largest in the world, twice the size of Japan’s, were to lapse into a meltdown situation such as this one, the effect would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen."

China's global meltdown-inducing "adjustment" continues unabated as fixed asset investment is weakest since 2000.

What's India got to do with it?

So far, it’s a different type of crisis – market tumult in the face of global QE, in the face of ultra-low interest rates and the perception of a concerted global central bank liquidity backstop. It’s the kind of crisis that’s so far been able to achieve a decent head of steam without causing much angst. And it’s difficult to interpret this bullishly. If Brazil goes into a tailspin, it will likely pull down Latin American neighbors, along with vulnerable Indonesia, Malaysia, Turkey and others. And then a full-fledged “risk off” de-risking/de-leveraging would have far-reaching ramifications, perhaps even dislocation and a collapse of the currency peg in China. China does have a number of major trading partners in trouble. Hard for me to believe the sophisticated players aren’t planning on slashing risk.

"A 'policy error' rate hike might well result in positive correlations among equities, commodities and bonds, due to a combination of risk off and higher rates. In this case it is not entirely clear how risk-parity funds would rebalance: A potential candidate for inflows would be currencies, and in particular the dollar. This would only put additional upward pressure on the dollar, reinforcing the “policy error” nature of the hike."

"One-by-one, the oil-majors will start to participate, then others will follow. While it might take some time to establish itself due to choppy markets and regulatory hurdles as well as the fact that it would introduce a foreign exchange element to crude futures, it is overdue for a Chinese contract to established."

Perhaps after intervening every single day in the past week (remember that FT piece saying the PBOC would no longer directly buy stocks... good times) in either the stock or the FX (both on and offshore) market, China needed a day off; perhaps even the algos got tired of constantly spoofing the E-mini and inciting momentum ignition, but for whatever reason the overnight session has been oddly uneventful, with no ES halts so far, few USDJPY surges (then again those come just before the US open), and even less violent CNY or CNH moves, leading to virtually unchanged markets in Japan (small red) and China (small green). And while the initial tone in Europe has been modestly "risk off", it is nothing in comparison to the massive gyrations that have become a stape in the past few weeks.

Despite the biggest intervention surge in offshore Yuan on record ("predatoring" any excess speculative fervor on PBOC actions in the spot market), a 'PBOC Advisor' noted that "long-term FX intervention was not their target." The Hong Kong Dollar is pressuring the strong-end of its range against the USD, trapped between the USD peg and weak economy (like so many others). Chinese stocks continue to tread water as China's Premier Li rules out QE (perhaps because pork prices are already at record high prices and are rising at a record pace), exclaiming that there "well be no hard landing," but BofAML expected 50-100bps more RRR cuts this year. PBOC strengthened the Yuan Fix tonight (just modestly).

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Spoiler alert: none of these scenarios end well...

Apparently fed up with the persistent spread between the onshore and offshore yuan, China has decided to add one more spinning plate to its collection by intervening in the offshore spot market.

Of course, with Goldman's desk making millions in commissions executing AAPL's weekly, if not daily, buyback orders, the last thing Goldman would dare to do is issue a report that angers Tim Cook. But another problem may be emerging for AAPL: China. As a reminder, China recently became the biggest end-market for iPhone demand and any hints this may be jeopardized could have severe repercussions on the stock price.  Which is why we paid particular attention to the report overnight from China's finance ministry, which accused a China unit of Apple of underpaying taxes in 2013 by 452 million yuan ($71 million), "which comes as China toughens its stance on tax payments by foreign firms."

It has become virtually impossible to differentiate between actual central bank intervention, hopes of central bank intervention, and how the two interplay on what was once the "market" but is now merely the place where money printers duke it out every day in some pretense of price discovery set by those who literally print money.

Losses from the US session extended following comments in one of the government's official mouthpieces that "China doesn't need massive stimulus." A BoNZ rate cut (blaming China's devaluation) sent Kiwi tumbling, Ringgit hit a fresh 17 year low against the USD, Japanese stocks collapsed over 650 points so far, and Chinese stocks are opening notably lower. Volume remains de minimus (99% below average) in Chinese futures trading as China devalues the Yuan by the most since Aug 13 and injects another 80 billion Yuan liquidity.