China

After yesterday's algo-driven mad dash to close the S&P green both for the day and for the year following Fed minutes that came in shocking hawkish, the selling has continued overnight, led by the commodity complex as rate hike fears have pushed oil back down some 2% from yesterday's 7 month highs, which in turn has dragged global stocks lower to a six-week low, while pushing bond yields higher across developed nations as the market suddenly reprices the probability of a June/July rate hike.

Just as we warned was probable, The PBOC sent a message loud and clear to the newly hawkish Fed following today's surge in the dollar after the minutes were released. With the 2nd biggest daily devaluation since the August collapse, China pushed the Yuan fix against the USD down to its lowest since early February - barely above the January lows.

Having relentless provoked Russia over the past month, when week after week the Pentagon expressed its shock and dismay that Russians dare to scramble fighter jets when US missile cruisers or reconnaissance planes fly next to, or above, Russian territory the US has decided to pick on another target: China.

Once again the fears over China's slowdown, global growth faltering, and the fallacy of US analyst hockey sticks are biting at the ankles of fiction-peddling talking heads. With copper plunging and the USD Index resurgent, as Bloomberg's Mark Cudmore warns, the risk-aversion sparked by China in January is on course for an imminent replay...

Deja vu all over again...

With the last few weeks really diverging...

One of the stated reasons for the Shanghai Composite's 1.3% drop (and it would have been worse had the PPT not launched its infamous last minute buying blitz) was also the most amusing one: the stock market bubble is in danger of popping even more as a result of a housing bubble that is now raging at a pace not seen since the last Chinese housing bubble, and thus threatens to soak up even more cash from China's chronic gamblers-cum-speculators.