Hong Kong

• French, U.S. Troops Enter Mali Hotel as Gunmen Hold Hostages (BBG)
• Top suspect seen on CCTV in metro during Paris attacks (Reuters)
• Paris Attacks’ Alleged Ringleader, Now Dead, Had Slipped Into Europe Unchecked (WSJ)
• Global shares march on as alarm bells ring for metals (Reuters)
• European Stocks Rise With Asian Shares as Zinc, Ringgit Advance (BBG)
• World leaders arrive for summit amid heavy security (Reuters)

The arrests or investigations targeting the finance industry in the aftermath of China’s summer market crash have intensified in recent weeks according to Bloomberg, creating a climate of fear among China’s finance firms and chilling their investment strategies. As one professor of Chinese economy noted, "some in the political leadership sought to find scapegoats to blame" for the market crash which along with massive intervention "created uncertainty and anxiety that can only undermine the effort to make these markets work better."

China’s producers couldn’t get the prices they wanted anymore, as early as 4 years ago, and that’s where deflationary forces came in. No matter how much extra credit/debt was injected into the money supply, the spending side started to stutter. It never recovered.

How can so much gold be supplied to China without someone buying it and thus being genuine demand? It cannot. Chinese gold demand as disclosed by the World Gold Council (WGC) is fallacious. We were already missing 2,500 tonnes from the WGC numbers and now we have to add another 604 tonnes...

• France, Russia strike Islamic State in Syria, EU aid invoked (Reuters)
• Pressure Grows for Global Response Against Islamic State After Paris Attacks (WSJ)
• Weakened Hollande Faces Election Backlash in Wake of Attacks (BBG)
• French Official Calls for Metal Detectors at Train Stations (NYT)
• Belgium Raises Terror Threat Level, Cancels Soccer Game vs Spain (BBG)
• Foreign Companies Scrap Paris Events After Terror Attacks (BBG)

Global policymakers have gone to incredible measures to stabilize market, financial and economic backdrops. Yet reflationary measures will continue to only further destabilize. When policy-induced “risk on” is overpowering global securities markets, fragilities remain well concealed. Fragilities, however, swiftly manifest with the reappearance of “risk off.” Rather quickly securities markets demonstrate their proclivity for illiquidity and so-called “flash crashes.” So after an unsettled week in global markets, the critical issue is whether “risk on” is giving way to “risk off” dynamics.

Roughly 21 tonnes, or 685,652 troy ounces of gold in .999 fine kilo bars, was withdrawn, net of a small deposit of 27,328 ounces, from the Brinks warehouse in Hong Kong yesterday. To put that into some perspective, that is the same amount of all gold in the entire JPM warehouse in the US. The point of this is that the price discovery in New York is becoming increasingly distinct from the actual physical supply and demand flows of bullion which are taking place in Asia... And that is a potentially dangerous development, especially with respect to a commodity that is being traded at a leverage in excess of 200:1.

For once, the overnight session was not dominated by weak Chinese economic data (which probably explains why the Shanghai Composite dropped for the second day in a row, declining 1.4%, and ending an impressive run since the beginning of November) and instead Europe took the spotlight with its own poor data in the form of Q3 GDP which printed below expectations at 0.3% Q/Q, down also from the 0.4% increase in Q2, with several key economies rolling over including Germany, Italy, and Spain while Europe's poster child of "successful austerity" saw Q3 GDP stagnate, far worse than the 0.5% growth consensus expected.

In the latest confirmation that China's Politburo is getting far more nervous than it will admit, hundreds of workers at a Hong Kong-owned toy factory in the southern Chinese city of Shenzhen have been protesting since last week after the owner "disappeared," leaving their wages unpaid.

• GOP debate winners and losers (Hill)
• European Stocks Rise as Dollar Weakens; Metals Decline on China (BBG)
• Global shares shrug off mixed China data, copper teeters near six-year low (Reuters)
• Fed's Evans: Looking forward to time when Fed can raise rates (Reuters)
• Alibaba’s Global Ambitions Face Counterfeit Challenge (WSJ)
• China Rebalancing Takes Hold as Output Slows, Retail Jumps (BBG)

For the third day in a row, China dominated the overnight newsflow with the latest industrial output data, which printed at 5.6% missing expectations of a 5.8% increase, and was tied with March for the lowest print since late 2008.

Empires, like adolescents, think they’ll live forever. In geopolitics, as in biology, expiration dates are never visible. When death comes, it’s always a shock. "At the beginning of the great unraveling, in 2015, I was still a young man. Like everyone else, I didn’t see this coming. Today, in 2050, fewer and fewer people can recall what it was like to live among those leviathans... Thirty-five years and endless catastrophes later on a poorer, bleaker, less hospitable planet, it’s clear that we just weren’t paying sufficient attention. Had we been listening, we would have heard the termites. There, in the basement of our common home, they were eating the very foundations out from under us. Suddenly, before we knew quite what was happening, all that was solid had melted into air."

In what's being described as a "palpably tense" tense auction, a "Chinese Beverly Hillbilly" dubbed "The Eccentric Mr. Liu" paid the second highest price at auction in history for a Modigliani. 

The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.

The market drop in August triggered by China devaluing the Yuan (another victim of the US Dollar bull market) was just the start. Once the US Dollar rally really begins picking up steam, we could very well see a crash.