Once again, a “surprise” yuan devaluation has roiled the world markets.
Or rather we should say ““markets”” because they are no longer made up of millions of individual investors, but millions of interconnected computer algorithms that run sophisticated pair-trade, arbitrage, and correlation driven strategies.
That these strategies are connected to “reality” is entirely unimportant to them.
Remember in 1Q19 when Apple’s earnings came in a bit low and the Yen/NZ dollar pair blew out as a result? Remember in August 2015 when China surprised the world with a -3% yuan devaluation and ““markets”” across the globe were rattled?
Well, it has happened again.
Only this time it wasn’t (or shouldn’t have been) much of a surprise. Trade talks went sour last week, and then Trump levied an extra 10% of tariffs on Chinese goods (all of them!) and China promised to retaliate.
A “surprise” currency devaluation has been one response. Another is suspending all US agricultural imports by state run companies.
For US equity markets priced-for-perfection this was an imperfect action at an awkward time.
For China there’s a lot on their plate right now and they seem to be in no mood for any sense of US trade bullying, whether that’s a fair assessment or not.
In Hong Kong it looks like the situation could blow up at any moment. Protests are increasingly violent, with the people upset that their umbrellas and water bottles were met with tear gas, thugs under the encouragement and protection of the police, and shotgun bean bags aimed at their heads.
by mark-cochrane-2 
