Risk Off and Theme and then some due to Move by the PBOC to let the Yuan drop below 7.00. From  IFR “China let the yuan breach the key 7-per-dollar level on Monday for the first time in a decade, in a sign that Beijing might be willing to tolerate more currency weakness that could further inflame a trade conflict with the United States..”

 Then China took trade war one step further via  Zero hedge “China is firing all the big guns tonight, because just an hour after Beijing effectively devalued the yuan, when it launched the latest currency war with the US,   Bloomberg reported that the Chinese government has asked its state-owned enterprises “to suspend imports of U.S. agricultural products after President Donald Trump ratcheted up trade tensions with the Asian nation last week.”

China’s state-run agricultural firms have now stopped buying American farm goods, and are waiting to see how trade talks progress. Translation: trade talks, even the fake kind, is now over, dead and buried, and the only question is how Trump will react

 China over the last hour or so pulled back a bit on the rhetoric saying they will not use Currency in a trade war and they will not completely stop buying US Ags ,a small  bounce in risk on these comments.

 Markets : Spoos -1.5%, Nasdaq -1.9%, FTSE -2.1, Dax -1.4% Bunds  off session highs but still +43 Ticks, yield -.51% Treasuries higher  Ultras +3 handles, 30s +1.5 handles ,Cash yields 2s and 3s -9 Bps,10s and 30s -8 bps  yields lower across the world  as China has raised stakes in trade war. Weaker yuan vs dollar = less demand for Commodities as they become more expensive for China ,makes China exports cheaper and no one and No country likes this in the present day trade war. Race to the bottom in currency is not a good thing.  The Euro/Yuan +2.2% EU is China’s biggest trade partner so any advantage one country creates at expense of another will not go over well. President trump has already tweeted his displeasure with China’s move and asked Fed to take notice. Trump can intervene in Currency market he has legal authority to do so Gold +1.5%,Cotton -3%, Soybeans -1.3%  ,Shanghai traded beans locked limit earlier this morning after china’s announcement of No more US grain purchase.

Fed speak will be important this week:

12:30 Brainard

Eco calendar:

9:00 ISM non manufacturing