Hong Kong On The Edge: Chinese Troops Gather In Shenzen; 100s Of Flights Cancelled Over Protester "Terrorism"

Protesters flooded Hong Kong's airport, one of the busiest in the world, on Monday, forcing authorities to cancel more than 100 flights as demonstrators expressed their anger over the violent police response to protests the night before.

Video of the airport terminal showed thick crowds chanting protest slogans.

Amid the unrest, Cathay Pacific, Hong Kong's flagship carrier, has reportedly fired two employees and suspended a pilot for participating in the protests. The airline said over the weekend that it would 'comply with a directive from China's aviation authority'. According to the FT, Cathay's move was "the starkest sign yet of Beijing's growing readiness to make high-profile businesses choose between the protesters and the government. The company's shares were off more than 4% in recent trade.

More broadly speaking, European equities sold off as the developments in Hong Kong created a risk off mood on a morning that was mostly devoid of data.

Per the NYT, the protesters gathered throughout the day, first filling up the arrival halls, before expanding upstairs to the departure halls. Monday's protest is a continuation of a three-day peaceful sit-in at the airport which began on Friday. It bore none of the violence that demonstrations on Sunday night had, where police fired tear gas inside a subway station and charged at protesters on an escalator.

Some incoming flights were being diverted to Taiwan.

Noel Tse, a 29-year-old nurse, said she participated in the sit-in at the airport because she thought the police had acted to aggressively on Sunday. "As a member of Hong Kong, this incident is no longer a political issue," Tse said. "It is a battle between right and wrong."

But even more ominously, over the border in Shenzen, the Chinese city that lies directly across from Hong Kong, Chinese People's Liberation Army forces were building up ahead of what appears to be a "apparent large-scale exercise," according to the Global Times. "Numerous" armored personnel carriers, trucks and other vehicles of the paramilitary police were seen heading towards Shenzhen over the weekend. That means the long-awaited military intervention from the mainland could be just around the corner - something that the Hong Kong people have condemned.

Yang Guang, spokesman from China’s Hong Kong and Macau Affairs Office, said there should be a crackdown on violence in the city, during a briefing.

"The people who are protesting are not backing down, the Chinese government doesn’t seem to be backing down, so if cooler heads don’t prevail it’s possible things in Hong Kong could get very ugly." Of course, as we listed last night, China has many other headaches on its hands, including trade war, PPI deflation, soaring food inflation, a trade war with the US, and record high debt. Steve Eisman of the Big Short fame said conflict in Hong Kong could further adversely impact the trade war between the U.S. and China and could ripple through the global markets.

"That’s actually what I’m worried about the most right now, because every weekend we’ve got this drama where the people of Hong Kong are having protests in the millions and its starting to get very violent,"said Eisman.