First thing this morning, we reported that "it appears that the next leg of the market's violent whiplash is upon us, as active traders scramble to reposition from being max short to as long as they possibly can... at least until the next flashing red headline unleashes the next panic selling round."
Well, moments ago we got just that headline, when the Washington Post reported that the Trump administration is preparing to condemn Beijing for what it says are China’s continued efforts to steal America’s trade secrets and advanced technologies and compromise sensitive government and corporate computers,
- U.S. TO CONDEMN CHINA OVER HACKING, ECONOMIC ESPIONAGE: WAPO
Citing U.S. officials, the WaPo reports that "multiple government agencies are expected to condemn China, citing a documented campaign of economic espionage and the alleged violation of a landmark 2015 pact to refrain from hacking for commercial gain."
And in what may be the most significant move, the DOJ is expected to announce the indictments of multiple hackers suspected of working for a Chinese intelligence service and participating in a long-running espionage campaign that targeted U.S. networks.
The coming indictments are the latest salvo in a major Justice Department initiative launched last month to combat Chinese commercial spying. Since September, federal prosecutors have brought charges in three intellectual property theft cases involving Chinese hackers and spies and one involving alleged economic espionage by a Chinese state-owned company.
The forthcoming indictments involve hackers whom U.S. authorities have connected to the Ministry of State Security, China’s intelligence and security agency, which has in recent years greatly increased its cyberintrusions into U.S. targets as China’s military has dialed back its activities.
In September 2015, Xi came to Washington and, standing in the Rose Garden alongside President Barack Obama, pledged that his country would not seek to steal trade secrets and intellectual property from U.S. companies to help Chinese industry. And although the military curtailed its commercial hacking in 2016, Beijing’s cyberspies — in particular those affiliated with the MSS — have stepped into the breach, government and industry officials said.
Additionally, the Trump administration is planning to declassify intelligence relating to the breaches, which date to 2014, and to sanction some of those believed responsible, according to people familiar with the plans.
“The tariff war is a bit of a sideshow to the broader geopolitical competition that is almost inevitably going to heat up,” said Ely Ratner, executive vice president of the Center for a New American Security, a think tank. “There is essentially no overlap between Xi’s vision for China’s rise and what the U.S. would consider an acceptable outcome for Asia.”
Taken together, the announcements represent a major broadside against China "over its mounting aggression against the West and its attempts to displace the United States as the world’s leader in technology, officials said", echoing our discussion from yesterday that the real reason for the US-China trade war is to containg China's technological advancement, and specifically its growing independence in semiconductor manufacturing.
They are part of an intensifying government-wide approach to confronting China and would come as the two countries have reached a momentary detente in their trade war.
In short, China is the new Russia.
The reported slammed the Dow Jones, wiping out virtually all gains for the day...
... with bank stocks on the verge of turning red as yield slide negative for the day.