China

Traders had some hope that they could take at least a brief nap ahead of the China open before all risk hell broke loose in the latest evening session, however either some liquidating algo or the Iranian oil trading desk had different plans, and moments ago WTI dipped below $28 per barrel, sliding as low as $27.92, doing so only for the first time since 2003, a new 12 year low.

The plunge in the highly correlated asset promptly dragged not only the USDJPY carry pair but also the E-Mini well lower, with ES sliding as low at 1861 moments ago before recouping some of the losses.

Earlier this month, even before China unleashed the end phase of its latest currency devaluation which since forced the PBOC to enforce even more capital controls to avoid accelerating capital outflows, Kyle Bass revealed that his best investment idea for 2016 was to short the Chinese currency:

China is “at the center of a clash between Saudi Arabia and Iran,” WSJ wrote on Tuesday, as Xi Jinping marks his first visit to Riyadh as President.

To be sure, Xi’s trip to the Mid-East comes at a critical juncture. The Sunni and Shiite communities exist in a perpetual state of strife, but Riyadh’s execution of prominent Shiite cleric Nimr al-Nimr threw gasoline on a fire that’s already being fueled by fighting in Syria, Iraq, and Yemen.

Submitted by Olivier Blanchard via The World Economic Forum,

The stock market movements of the last two weeks are puzzling.

Take the China explanation. A collapse of growth in China would indeed be a world-changing event. But there is just no evidence of such a collapse. At most, there is suggestive evidence of a mild slowdown, and even that is far from certain.

Earlier we showed that despite its 16th cut to world GDP growth forecasts (out of the past 21), the IMF still believes that the hockeystick rebound to global growth is just around the corner:

However, one place where not even the IMF can in good conscience predict a hockeystick-like rebound in growth, is China, where the IMF now expects GDP to grow only 6.3% in 2016, dropping to an even lower 6.0% in 2017.

This is what the IMF warned about the risks to its overall outlook, which not surprisingly are focused on China: