DXY continues its climb:
The AUD slaughter goes on:
Not hard to find the culprit:
Commodities and miners were hosed:
EM and junk too:
Yet the bear steepening rolled on:
And stocks resumed selling:
The China rate cut passed like rain on the mountainside. Markets are beginning to realise that what is happening in China is neither good nor temporary.
Only beginning, mind you. The China shock is immensely deflationary. In due course, it will knock oil and energy back down and swamp everybody with cheaper commodities and goods.
The bear steepening will become a bull flattener as DM interest rates follow China.
Its interest rates are far too high:
Credit is pushing on a string:
But China is only moving slowly because it is terrified about losing control of CNY. Rightly. If they do, then they will have a bank run as well as a property crash:
But it will have no choice but to keep cutting rates, or it will be in perma-recession.
As CNY falls a long way from here, growth can stabilise but only at much lower levels.
Welcome to the new Japan China:
While CNY plunges AUD will too.
