Columbus Day is supposed to be a calm holiday, but we are actually seeing some big moves continue in the financial markets. Overnight the Chinese equity market slumped. It is amusing to hear mainstream media rant on about it as it was not unexpected. The Chinese local markets were closed last week, and for the people following the US traded ETF FXI US, it is hardly a surprise to see the Chinese market fall since it was just a “catch up” move to the US traded ETF.

More interesting today is the fact we are seeing new volatility in various risk assets.

One of the bigger risk on/off indicators is the JPY. We are seeing this FX trade below the huge 114 level again.

The JPY (white) versus the SPX (orange). Be sure to watch the JPY going forward, as SPX tends to move in tandem.

Another asset with renewed volatility is the Yuan. It is moving above the 6.90 level today and has since last 2016 closed at a “worst” level only on one occasion.

Nothing really new, but Italian 10-year yields continue moving sharply higher. Despite it is still all about decimals in the budget, the Italian 10 year has surpassed the May levels by a huge margin. Back in May people spoke about the Italexit, now just a budget. Something just doesn’t feel right.

Italy’s biggest bank (still), UniCredit, is trading sharply down and is actually halted for trading as we write this. The stock is breaking huge support levels today.

The MIB index is following the same path. Another big break lower below the support levels.

Equity fear indices, VIX and V2X, continue moving higher. One-month chart of VIX and V2X clearly show investors are worried.

If one should be scared or not we leave to pundits to advice on, but at these levels of implied volatilities, equity markets are priced to move approximately 1.2-1.3% per day. Do you believe in that?

Source: charts by Bloomberg