As discussed, the sell off in Bond Markets is also clearing out the trading funds and day traders’ stocks, as they all cut leverage. The short term traders may yet be buyers-on -dips, but we suspect that they have packed their tents and moved off to the Commodity Markets, where Oil and Copper continue to roar.

In the latest Friday Market Thinking, we concluded that the biggest medium term risk to markets was likely to be bonds, given their historic tendency to damage other asset classes as they deleverage.

We like to look at markets as being driven by the behaviour of three different groups – the short term speculators, the medium term asset allocators and the longer term investors.

The economist Michael Hudson has a useful expression contrasting the Economic Models of the West with those of emerging Asia as Industrial Capitalism (Asia) versus Financial Capitalism (the West), where the latter is in effect a return to the rentier or landlord class of extractive capitalism.

Sentiment is an important driver of short term markets and with Chinese money being an increasingly significant factor in markets generally, so an understanding of Chinese psychology and sentiment becomes genuinely relevant.