Markets: Crash and carry

Also: Britain, Bangladesh, Pakistan, and Indonesia.

The South Sea Bubble, a Scene in Change Alley in 1720, engraving by William Hogarth of the painting by Edward Matthew Ward, 1847, oil on canvas, Tate Gallery, London.

In today’s dispatch:

• MARKETS. The correction spreads beyond Japan and tech.

• BRITAIN. Starmer vows to punish agitators while eyeing migration reforms.

• BANGLADESH. By hollowing out democracy, Sheikh Hasina has set a trap.

• PAKISTAN. Imran tries to make peace with his tormentors.

• INDONESIA. Prabowo seeks to boost growth and limit a top investor.

Geopolitical Dispatch is the daily intelligence and risk briefing of Geopolitical Strategy, an advisory firm specialising exclusively in geopolitical risk.

MARKETS. Crash and carry

The correction spreads beyond Japan and tech.

The Nikkei 225 fell 12.4% Monday, its worst day since the crash of 1987. Taiwan's Taiex index fell 8.4%. The VIX was up 26% and Bitcoin down 14%. China was relatively unscathed. The Hang Seng fell 2.2% and Shanghai was 1.5% lower.

INTELLIGENCE. The Black Monday crash of 1987 was partly due to an asset price bubble (as is unwinding in many technology stocks), and partly due to diverging expectations (as is happening on US and Japanese rates). Today’s correction is compounded by relatively thin trading desks over summer and worries on geopolitics (Iran is expected by some to retaliate today). Partisan commentary attributes the slump to fears Kamala Harris will win in November.

FOR BUSINESS. A lot of froth is leaving as traders wake up to the relationship between politics, economics, credit and value. Some of the panic seems slightly premature (e.g., fears the US is already in recession based on one bad jobs report) but early warning signs abound (e.g., Intel's plan to pause dividends and axe 15,000 positions). One thing seems sure: a crash at this stage of the electoral cycle bodes ill for any incumbent, even if it helps usher rate cuts.

---

---

BRITAIN. Reading between the Riot Act

Starmer vows to punish agitators while eyeing migration reforms.

Keir Starmer condemned "far-right thuggery" Sunday after violent anti-immigrant protests continued for a sixth day following the murder of three girls in the northwest last week. A crowd of 700 set fire to a migrant hostel in Yorkshire.

INTELLIGENCE. Britain's far-right is politically on the fringe, and multiculturalism largely works, but the UK has a long history of xenophobic violence. In past