Bofa Predicts That A Volatile Tumble Surge Inward The Euro - Every Bit Eu Investors Repatriate - Would 'Indicate Em Morphing Into Global Deleveraging Event'

That's a business from a September nine ZeroHedge piece, "BofA: This Is H5N1 Redux Of The 1998 Crisis.... Just One Thing Is Missing", retentiveness of which was triggered yesteryear this action:

FinViz

The movement upward from the August lows isn't withal what could live described every bit volatile but that form of "V" shaped bottom could live setting upward a movement to the upside every bit powerful every bit the spend upward from the Feb - Apr highs.

Here's to a greater extent than or less of the ZH piece:

...Which brings us dorsum to the topic of rolling behaviour markets, or every bit Hartnett dubs it: "Bitcoin to Popcoin", or a footing inward which the bursting of the Bitcoin bubble may pick out been the get-go domino:

XBT 1st FX crash of 2018…TRY, VEF, ARS, IDR, BRL, ZAR…Great EM Currency Crash of 2018 (Chart 6) to revive EM inward 2019, but spill guide a opportunity is EM contagion via FX, spreads & EPS to Europe in addition to survive US.

BofA i time once again reminds us of its favorite crisis indicator: the collapse of the Brazilian Real, writing that the Euro is at highs vs BRL, which "historically coincides amongst fiscal termination (Chart 1)."

And piece the difference observed betwixt the the States in addition to the residual of the footing may seem unique, it has happened on diverse occasions inward the past, virtually notably inward 1998.
Which brings the side yesteryear side question: Is the electrical current marketplace a redux of 1998? To Hartnett the respond is yeah for the next reasons:

• Fed tightening,
• US decoupling,
• flattening yield curve,
• collapsing EM,
• underperforming levered quant strategies

All of these echo ’98; but i affair is missing: global contagion.
For those who may non think - or pick out been born - dorsum inward 1998 it was Nippon that spread Asian crisis inward ’98 (China):

Fast frontwards xx years when the BofA CIO believes that this fourth dimension Europe volition live the epicenter of the 2018 global contagion, amongst the collapse inward unusual orders of High German working capital missive of the alphabet goods -12% yesteryear vii months – a harbinger of what is coming.

And if the unusual orders from Deutschland is the "canary", BofA predicts that a volatile spill surge inward the Euro - every bit European Union investors repatriate - would "indicate EM morphing into global  deleveraging event."

And if Euro repatriation inward Europe is the 1st vector of contagion, BofA predicts that the second, in addition to far to a greater extent than obvious one, is only debt, or Credit contagion:

Credit spread widening the 2nd vector of contagion:
lookout adult man credit spreads inward excessively indebted Europe (credit/GDP  258%), Red People's Republic of China (credit/GDP 256% = record), EM (record credit/GDP 194%), the States IG BBB ($4.93tn outstanding, upward from $1.08tn ’08)."

In conclusion, Hartnett asks rhetorically if at that topographic point has "ever been an investment acronym that didn’t terminate inward a bubble" in addition to notes that iv of 8 FAANG+BAT stocks are straight off inward behaviour marketplace territory. This volition likewise dot the agency to the terminate of the upcoming global contagion which "ends amongst investors selling what they ain & honey (see tech flows below), fountain inward systemic guide a opportunity & the Fed blinking."...

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