On Black Monday Deutsche Bank Sums It Up "The Fragility Of This Artificially Manipulated Financial System Was Finally Exposed"

Today's dose of vile tinfoil hattery magick comes straight from the bank with the cool $55 trillion or so in derivatives, Deutsche Bank:

The fragility of this artificially manipulated financial system was exposed over the last couple of days of last week. It all ended with the S&P 500 falling -3.19% on Friday - its worst day since November 9th 2011.

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We've long felt that the only thing preventing another financial crisis has been extraordinary central bank liquidity and general interventions from the global authorities which we still expect to continue for a long while yet. So when policy changes, risks arise. The genesis of this recent sell-off has been the threat of the Fed raising rates next month, but China's confrontational move two weeks ago and the subsequent knock-on through EM have accelerated us towards something more serious. We always thought something would get in the way of the Fed raising rates in September and we're perhaps seeing this now. With 24 days to go until we find out, the probability of a hike has gone down to 34% from a 54% recent peak on August 9th. Having said we always thought something would come along to derail a Fed rate hike we probably should have gone underweight credit. However with trading liquidity poor and with a reasonably high desire to be long amongst investors there has to be a big move to justify the change in stance. Also with a strong possibility that the Fed will relent and that China could add more stimulus soon, there may be a small window to be short European credit. So at the moment this could be a dangerous time to sell. However if it wasn't for expected intervention and extraordinary central bank policy we would be very bearish as the global financial system remains an artificial construct reliant on the largesse of the authorities.

So 6 years after we first said what at the time was seen as heretical "tinfoil" conspiracy theory, now everyone admits it. Almost time to take a vacation maybe...

NYSE Invokes Rule 48 (Once Again) To Pre-Empt Panic-Selling Open

The status quo must be maintained...

NYSE granting "triple width opening quote relief in all option classes for August 24, 2015", Invokes Rule 48

The last time this was invoked was in Jan 2015 (during the blizzard), in June 2012 (amid a dramatic drop in pre-open futures) and in Sept 2011 amid the chaotic 400-point swings in The Dow. Funny they do not use this "Rule" when futures indicate massive upside opens?

Bloodbath: Emerging Market Assets Collapse As China Selloff Triggers Panic

On Sunday evening, this happened:

• BLOOMBERG COMMODITY INDEX SLIDES TO LOWEST LEVEL SINCE 1999

That’s right, Bloomberg’s commodity index cratered to its lowest level since 1999 or, said differently, the lowest level of the 21st century. That headline flashed just minutes after we highlighted Barclay’s take on the "long, slow, and painful" end of the commodities supercycle which is weighing heavily on emerging markets in the wake of China’s move to devalue the yuan. Here’s how we described the setup on Sunday evening:  

Emerging markets will remain in focus this week as the world watches anxiously to see if China’s move to devalue the yuan will ultimately transform an already precarious situation into an outright crisis.

Slowing demand from China has been the major concern for commodity exporters and indeed, wide open capital markets (thanks to ultra accommodative monetary policies across the globe) have served to keep struggling producers afloat, perpetuating a global deflationary supply glut.

Saudi Arabia’s attempt to squeeze the US shale complex has only exacerbated the problem, as persistently low crude prices put further pressure on the commodities space as well as on the FX reserves of oil producing countries. When China devalued the yuan,it validated the suspicions of those who had assumed that the country’s economy was in far worse shape than anyone at the NBS was willing to admit. Additionally, it marked a new escalation in the global currency wars and threatens to undermine the export competitiveness of many an emerging economy.

So that, in a nutshell, was where we stood going into the week and that rather abysmal backdrop (if you’re an EM) has prompted quite a few analysts and commentators to draw a comparison between what’s unfolding in EM FX markets and the Asian Financial Crisis of 1997/98. What’s amusing is that some of the same desks who rushed to make the comparison a week ago now look to be talking back their predictions, perhaps realizing that circulating such things might be adding fuel to the fire. 

But it is far too late for that - the genie is out of the bottle and indeed it was a bloodbath across EM overnight with currencies under continued pressure and the MSCI EM index falling 4.2% as Chinese stocks collapsed after the PBoC failed to slash RRR over the weekend.

Credit to Zero Hedge