In China: More Drama
Tuesday brought more drama in Chinese markets.
A day on from an egregious selloff in Hong Kong triggered by fears around Xi Jinping's decision to jettison moderates from the Central Committee and fill four open spots on the Standing Committee with staunch loyalists, the PBoC set the yuan fix at the weakest since 2008 and tweaked cross-border borrowing regulations in an apparent bid to boost foreign capital.
The onshore yuan was testing the weak end of the trading band, and its offshore counter
Over on the stock side, most of your readers have begrudgingly accepted that in the USA, economics and company fundamentals no longer have as much impact on intra-day stock market movements as do algos, algos that prey on other algos and robotraders.
Why not look at the Sunday night (US time) price action in the same light? Much of it was likely triggered by pros putting on a major pairs trade. Who else would be prepared and willing to slam the HK/Chinese market at the opening bell while pegging up the S&P futures 35 points at the same time?
Others followed, spec & real.
So Marko K just may be right IF the pairs trade does not quickly work.
But longer-term it’s hard to get excited when the further division of the global economy is clearly in motion.