Confucius Say.

If markets were feeling a bit queasy on Monday with regard to the Trump administration’s trade escalations, well then Tuesday was a session characterized by outright nausea.

On Monday evening, seemingly irritated at China’s promise to go “blow for blow” on trade, Trump instructed the USTR to go and find him another $200 billion worth of goods to tax and it was all downhill from there.

Peter Navarro is pleased, going so far as to tell Kayla Tausche that Trump’s efforts to undercut the future of global trade and commerce are “visionary” and “courageous”.

Meanwhile, at the White House:

 

Yes, “good lord”, and indeed that’s what markets seemed to be thinking as risk assets careened lower across the globe.

U.S. stocks were down sharply, and really all you need to do is look at futures to tell what went wrong:

Treasurys rallied and 10Y yields at one point fell to 2.85, down some 15bps from their post-Fed knee-jerk highs (although still well off the lows hit amid the Italian bond selloff on May 29):

Prepare yourself for inversion:

The dollar was higher on the day:

Emerging market equities dove again and the ETF is now sitting at its lowest since August:

But the really unnerving thing is this:

This is from Bloomberg’s Mitchell Martin on Monday:

A sharp rise in options open interest for the world’s largest emerging-market exchange-traded bond fund points to further pain in that corner of the credit markets. Outstanding options contracts have sextupled this year on the iShares J.P. Morgan EM Bond ETF (known by its EMB ticker), rising to a record 469,313. Combine that with short interest near an all-time high and you have a sizable number of investors indicating they expect this year’s decline to persist, according to Damian Sassower, fixed-income strategist at Bloomberg Intelligence. The ETF has seen its price fall about 8% in 2018, a decline whose start roughly coincided with the new year. Emerging-market bonds are suffering as developed countries begin to undo years of monetary stimulus that sent international investors in search of higher yields.

And EM FX is a disaster:

Here’s a quick snapshot on the day of the lira, the real and the rand:

Third straight day of losses for European equities or, more to the point, European stocks have fallen every day since the Thursday’s Draghi-inspired rally. The VStoxx hit a 16 handle at one point:

And then there was this, late in the session:

IRAN WILL NOT ACCEPT EVEN A MODEST INCREASE: ZANGANEH

— Heisenberg Report (@heisenbergrpt) June 19, 2018

That would appear to suggest that Iran is sticking with their pledge to try and veto any Saudi-led push to cement a production hike deal at the OPEC meeting.

As documented first thing Tuesday morning, China was a bloodbath as equity markets reopened after the holiday. The SHCOMP dove 3.8%, to the lowest since June 27, 2016. Tuesday was the second worst day since February 2016 and this was the first close below 3,000 since September 2016. As Bloomberg recounts, “China’s benchmark equity gauge sank almost 5 percent at one point and by the close, the escalating tensions with the U.S. had sent 1,023 stocks down by the daily 10 percent limit — or more than one in four.”

Finally, for your moment of zen:

President Trump: "We want to solve family separation. I don’t want children taken away from parents, and when you prosecute the parents for coming in illegally, which should happen, you have to take the children away." pic.twitter.com/toOfjZ7rk4

— NBC News (@NBCNews) June 19, 2018