The S&P 500 is down 19 points to 2041 shortly after the open. It follows a similar decline on Monday.

Worries about China are the chief driver after the Shanghai Composite fell 5% on chatter the government will lower growth targets. That implies less stimulus and an element of defeat for policymakers.

SP 500 daily

S&P 500 daily

It’s clear the risk rally since mid-October is facing its first genuine setback. It’s spilled over into USD/JPY, which is now down 144 pips to a session low of 119.24.

In a bull market, assets ride up on escalators and down on elevators and that’s what we’re seeing in China and (to a lesser extent) the US. There’s a squeeze ongoing but the story hasn’t changed and after the rout flattens out, the trend will resume but there’s no sense in trying to pick the bottom.