Fiscal Cliff vs China stabilisation - Volatility market angle

"Living at risk is jumping off the cliff and building your wings on the way down." - Ray Bradbury 

Moving outside the credit spectrum, we would like to entertain you with some interesting points made by our good cross-asset friend with whom we regularly discuss our macro and market interests:

"These last few days saw an increasing focus on fiscal/political risks of the US markets. 

At the same time several macro data releases seem to hint at a stabilisation of economic activity in China.

Wrong or right trend, equity options markets seem to validate this view, as shown by the record low spread between emerging markets implied vol (summarised by EEM US ETF options) and S&P 500 options. 3 months atm (at the money) implied vol :

However these kind of disconnections in volatility markets generally do not last long...

Stay tuned!