After imploding in its morning session by a whopping 5.8%, which would have brought the two day crash to a stunning 10%, the Shanghai Composite rebounded trimming its losses by more than half due to so far unfounded rumors there will be a PBOC press conference later today in the last hour of trading in which it may provide some impetus for a bounce (which oddly enough is boosting US equity futures far more effectively than those of China). The expectation is that at the Lujiazui Forum (link here), the PBOC will speak alongside the the CSRS, the CBRC, and CIRC at which the PBOC will wave a white flag to the Chinese "feral hogs." Don't hold your breath: considering the China Daily oped released earlier, this seems highly improbable but at this point global markets are clutching at any and all straws. Look for big market disappointment if the PBOC refuses to address any additional liquidity provision in a few minutes or over the next several days especially since unlike the US, the Chinese central bank is not willing to be held hostage by the stock market in its mission to rid the country of shady "shadow bank" lending conduits.

Specifically, and as has been the case for a while now, the main reason for today's ongoing crash is precisely the ongoing lack of activity by the PBOC which did neither repos nor bill sales overnight, keeping excess liquidity precisely where it has been: non-existent. And as we said yesterday, the interbank liquidity stability lasted "for a very brief amount of time", with both 1 Week and 1 Month SHIBORs resuming their surge.

It got so bad, financial news website Hexun wrote an editorial in which it pleaded the PBOC to say something and give the market clear signals on its intentions in dealing the with nation’s cash crunch, as the markets are "clueless." Whether due to this, or finally crying uncle, the PBOC is now expect to come out and say something. Unless it doesn't of course. Which will probably be the case because an editorial in China Daily, the official party mouthpiece, the author said that the drop in benchmark Shanghai Composite Index shows authorities are preparing to continue painful and necessary reforms to keep the economy growing in a more sustainable manner. It is highly unlikely they will flip their stance just because the crash is continuing.

In the meantime, the result is that absent some miraculous surge in the last hour of trading, the Shanghai Composite will be down about 2.5% (Material index -4.6%, Property Index -3.4%, Commercials Index -3.8%, Financial Index -2.8%), -8% in two session, and down -22% from its February highs: an official bear market.

This is what the carnage looked like before the now traditional deus ex rumor.

If there is no PBOC intervention, expect the US and European equity futures