Saudi Arabia

"The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance."

Early on Monday, gun shots were fired at a home for asylum seekers in western Germany and one resident was lightly injured, police said. The shots were fired at a window of the building in the town of Dreieich at around 2.30 a.m (0130 GMT), and one hit a 23-year-old asylum seeker who was sleeping, according to police in Offenbach, near Frankfurt. He was taken to a hospital, but was able to leave shortly afterward.

On the heels of a tumultuous weekend that saw Saudi Arabia cut diplomatic ties with Iran after the Saudi embassy was torched by protesters angry at the execution of a prominent Shiite cleric, CDS spreads for the kingdom have blown out to six-year wides while the implied odds of the riyal peg finally breaking are hitting new record highs.

This morning, the headlines surrounding what's quickly mushroomed into a Mid-East melee are coming fast and furious and in the latest escalation, the Saudi foreign ministry says the kingdom will now cut all commercial ties with Iran.

What began with the execution of a prominent Shiite cleric in Saudi Arabia has devolved into a full blown sectarian showdown with Bahrain cutting diplomatic ties with Iran, the UAE recalling its ambassador, Sudan expelling the Iranian mission, and Iraqi Shiites attacking Sunni mosques. In short: tinder box meet spark.

• China stocks tank, triggers circuit breaker (Reuters)
• Stocks Slump Across Europe and Asia Following Shanghai's 7% Crash (BBG)
• China Halts Stock Trading After 7% Rout Triggers Circuit Breaker (BBG)
• Iran says Riyadh thrives on tension after relations cut (Reuters)
• Saudis and Bahrain Face Off With Iran in Worst Clash Since 1980s (BBG)
• Syrian rebel group backs Saudi move to cut ties with Iran (Reuters)

It all started off relatively well: oil and US equity futures were buoyant on hopes Iran and Saudi Arabia would break out in a bloody conflict any minute boosting the net worth of shareholders of the military industrial complex, and then, out of nowhere, like a depressed China in a bull shop, the "mainland" crashed the party and it all well south very, very quickly...

Earlier today, as Iranian police struggled to disperse protesters gathered outside the Saudi consulate in Mashhad, we said that Saudi Arabia and Iran may be on the verge of a historic diplomatic crisis after demonstrators burned the Saudi embassy in Tehran on Saturday evening. Sure enough, just hours later, Saudi Foreign Minister Adel Al-Ahmad Al-Jubeir announced that Riyadh has cut diplomatic ties with Tehran

Earlier in the session, after the surge in oil prices on fears of a spike in belligerence between Saudi Arabia and Iran, bulls were hopeful that after a poor close to 2015, at least the first trading day of 2016 would set a positive mood: after all, if there is one thing war is good for, it is to lift stock markets. And it did... for about 3 hours.  Then moments ago, Caixin Media and Markit Economics released the latest December PMI, which was, in a word, a total disaster, one which promptly sent US equity futures sliding, and the Shanghai Composite tumbling some 4%... and CSI-300 Limit down.

"Black Daesh, white Daesh. The former slits throats, kills, stones, cuts off hands, destroys humanity’s common heritage and despises archaeology, women and non-Muslims. The latter is better dressed and neater but does the same things."

"We believe that diplomatic engagement and direct conversations remain essential in working through differences and we will continue to urge leaders across the region to take affirmative steps to calm tensions," US officials said on Sunday on the heels of Saudi Arabia's decision to cut diplomatic ties with Iran following the execution of a prominent Shiite cleric and the firebombing of the Saudi embassy in Tehran. The response from Riyadh: "enough is enough."

The flames of sectarian violence have been thorougly fanned in the Mid-East after Saudi Arabia killed a prominent Shiite cleric in the largest mass execution carried out by Riyadh in a quarter century. As protesters torched the Saudi embassy in Tehran, the Ayatollah warned that "the Almighty God shall not ignore the innocents’ blood and the unjustly spilled blood will backfire on the politicians and the executives of this regime very quickly."

To delve into Daesh’s convoluted money trail, one must first explore its equally convoluted origins. And in both areas, the role of the U.S. and its allies can not be ignored.