A spate of earthquakes around the South China Sea from Indonesia, Taiwan and Philippines puts us on Tsunami alert but nothing happens and its all explained away as aftershocks from this weekend’s tragedy. For markets we see similar warnings, the quakes in TRY, NZD and RUB all look important but are explained away today as idiosyncratic. Those aren’t dominos but they do crash down.

This is the problem with the story – as a flood of currency weakness in the midst of risk-on moves up in equities (US shares are just 1% away from January record highs) puts tail-risk worries back into play.  Explaining RUB weakness on US sanctions, TRY at new record lows on dashed hopes from US talks about sanctions and NZD at 2-year lows on a dovish RBNZ outlook is all fine and good enough. The bigger backdrop is that they happen in a larger market and their waves mix with the China/US worries, fears that FOMC hikes will drown the EM funding and geopolitics as Italy, Germany and UK continue with their summer of discontent. It may just be easier to explain today away as just another hot and humid summer day with a few showers but no big changes.

China CPI and PPI both slightly higher but not enough to spur anything different – money market rates did jump 20bps in 2Y there adding to CNY stability below 6.85. The Philippines BSP rate hike of 50bps to 4% was as expected but its still the steepest move in 10 years and with hawk talk following a slightly disappointing 6% 2Q GDP from 6.8% missing the 6.6% forecast – it may highlight the problem in EM – higher rates, weaker FX and missing growth. Throw in the problem of oil – the 3% drop yesterday adds to commodity issues and points back to US sanctions as US oil vanished in the trade data yesterday.

WASDE Friday will be worth watching with rising food inflation watch thanks to weather – EU wheat crop worst in 20-years– and tariff worries in Soybeans/Corn add up. As for growth Japan saw weaker core machinery orders and remains nervous about US trade talks given China outcomes. Running into Europe, moods changed like the weather and risk-off doesn’t seem so idiosyncratic as EM pain bleeds into Europe. This puts focus back to carry unwind risks and logically, JPY as the risk barometer.