This is an emergency announcement for bubble watchers: China CDS has soared to 194.5 bps, +14.5 in the past few hours, the biggest relative mover in the sovereign realm, which has just hit the widest it has been since March 2009. Ironically the incremental newsflow was mildly positive after the Final September HSBC PMI came at 49.9, still contractionary, but modestly better than the Preliminary 49.4, and unchanged from the August print.

That however brought little solace to China bulls, who have seen their local stock holdings drop significantly in the last few days now that the China “Hard Landing” scenario is becoming widely accepted. Not helping is a just released UBS report which now expects Q1 2012 GDP to drop to below stall speed at 7.7%.

Whether or not the country can land softly, or hardly, or at all, with that kind of growth drop, is certainly unknown. Look for more widening in CDS spreads as the China crash thesis permeates the vigilante community which has now picked its next target.

Bloomberg recaps the UBS piece:

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A very small initial rally has given way to more significant selling now as credit and equity markets pull back, EUR drops, and Bunds have rallied 1-2bps. Selling the news makes some sense but is hardly confidence-inspiring…especially given sub financials (light blue) move - though we are sure we will flip-flop for another or two yet.

UPDATE: Bunds at low yields of day now

Perhaps the phrase - we’re gonna need a bigger boat  - will become more popular vernacular today.

It has been written extensively over the course of the last few weeks on the increasing rhetoric from Asia over currency fluctuations and furthermore how China was playing the US and Europe off against one another in a quasi-trade-war gambit.

A flurry of headlines today/tonight via Bloomberg reminded us to revisit what is also a very worrying trend in Chinese CDS (and more broadly Asian sovereigns), as perhaps sophisticated investors look for the cheapest low cost long vol trades on a non-decoupled world devolving to its lowest common denominator.

Between Carney’s ‘substantially undervalued Yuan’ comments, record slides in Dim Sum Bonds, growing concerns over growth longevity, Japanese retail sales, Aussie home prices, Sony’s troubles in currency-land, and Barclay’s warning of a restart to the Yuan peg in the case of global recession - contagion and transmission channels appear alive and well in global trade.

Via Bloomberg, this morning:

*CARNEY SAYS ADMINISTRATION `REVIEWING’ CHINA CURRENCY BILL

*CARNEY SAYS CHINA CURRENCY `SUBSTANTIALLY UNDERVALUED’

followed quickly by:

Yuan Drop Spurs Record Slide in Dim Sum Bonds: China Credit

Yuan-denominated (Dim-Sum) bonds in Hong Kong are headed for record monthly loss, erasing gains for the year, as worsening outlook for global economy fuels concern China will slow pace of its currency’s appreciation.

which was ‘helped’ by this evening’s comments:

*CHINA MAY RESTART YUAN PEG IN GLOBAL RECESSION, BARCLAYS SAYS

*STRONG CASE TO PEG YUAN TO BASKET OF CURRENCIES, BARCLAYS SAYS

And growing concensus that growth in China will slow significantly:

In the latest Bloomberg Global Poll of investors, most global investors and analysts, or 59 percent, foresee China will register economic gains of less than 5 percent annually by 2016.

that were around the same time as Sony’s headlines hit:

*SONY SAYS EURO WEAKNESS TO HAVE `HUGE IMPACT’ ON EARNINGS

*SONY SAYS IT HAS NO COUNTERMEASURES AGAINST WEAK EURO  :6758 JP

…noting that “Sony doesn’t buy many components from Europe, limiting its ability to benefit from euro weakness”

Which leaves Chinese CDS (denominated in USD remember) hitting their highest levels since early March 2009 as the spread between 5y and 10Y Chinese CDS rises to record wides of 74bps

While we suspect much of the steepening and widening of China sovereign CDS is speculative revaluation/global-recession bets, Chinese CDS still has a long way to go to meet up with the other global majors in terms of its risk relative to government bonds (since CDS have the implicit currency/devaluation premium and not just technical default).

Charts: Bloomberg

The takedown of gold and silver markets over the past two weeks signified a new milestone in corruption, brazenness, arrogance and it reveals the level of evil control behind our government.

This past week, in just one week, saw gold fall almost $200 and silver about $10.00. We have been involved in gold and silver for 53 years and the only event that comes close to this was October 19, 1987, when we witnessed the Bank of England sell down gold $100.00 under the orders of the Fed and the US Treasury, which borrowed the gold from the IMF.

That was illegal, but that means little to the Illuminists who do as they please. Today thanks to Ronald Reagan we have the “President’s Working Group on Financial Markets,” which has legitimatized corruption to conform to the Keynesian model of corporatist fascism.

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While Friday’s dramatic skid lower in the precious metals was later blamed somewhat on a leaked margin hike (as well as the simultaneous and anti-empirical sell-off in 30Y), it seems the liquidations that were rumored (whether hedgie or central banker) are in play once again as both gold and silver (the latter very significantly!) are finding little support.

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Bear

“Dr. Copper” is sending an ominous signal to the equity markets. After hitting a high in early April, the metal has taken a hard turn south, and with today’s hammering has led stocks very near, if not already into, bear-market territory. Metals strategist Jeff Hirsch takes this - along with weak manufacturing data out of China - as a sign of impending global recession, and forecasts financial markets capitulating over the next few weeks as investors begin to panic.

Bull

“Stocks are now more undervalued than at the generational bottom back in 2009,” says Doug Kass (we covered that call). The key for Kass: Growth is slowing, not stopping. He also thinks banks are about to have a La Dolce Vita moment in which they get their act together. The final ingredient, he says, is falling commodity prices - especially oil.