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Chinese small-cap valuations are looking stretched, the U.S. changes tack on North Korean engagement, and Morgan Stanley thinks Bitcoin's recent slide may have presaged the global tumble in equities. Here are some of the things people in markets are talking about today.

China Small Caps

Sky-high valuations are getting harder to justify for Chinese small caps as their earnings growth disappears in the face of a government deleveraging campaign. Combined profits of firms on the ChiNext gauge may have increased 5.3 percent in 2017, according to Bloomberg calculations based on 99 companies' guidance and preliminary earnings. That compares with 51 percent for all 100 members in 2016.

India's Easing Inflation

India's retail inflation eased from the fastest pace in 17 months, offering some respite to policy makers and bond investors battling the fallout of Prime Minister Narendra Modi's expansionary budget. Consumer prices rose 5.07 percent in January from a year earlier, the Statistics Ministry said in a statement in New Delhi on Monday, in line with the 5.1 percent Bloomberg consensus. However, the central bank forecasts the pace could pick up to as fast as 5.6 percent by September once the government begins spending for the year starting April 1.

Bitcoin, Coal Mine Canary?

Esoteric exchange-traded products? Risk parity? Inflation fears? Forget about all that. The genesis of the widespread correction in risk assets has its roots in flagging enthusiasm for Bitcoin, according to Morgan Stanley. Let that sink in. Separately, the cryptocurrency, already down by more than half since hitting a record near $20,000 in December, could plunge a further 90 percent in an environment of unsustainably growing supply, according to Bloomberg Intelligence commodity strategist Mike McGlone. Using Amazon.com Inc. and the Nasdaq Composite Index's spectacular rise and retreat at the turn of the millennium as a proxy, he said the currency could plunge to $900.

U.S. and North Korea

The U.S. is ready to engage in talks about North Korea's nuclear program even as it maintains pressure on Kim Jong Un's regime, Vice President Mike Pence said, signaling a shift in American policy. Pence and South Korea's President Moon Jae-in agreed to pursue dialogue with North Korea during conversations at the Winter Olympics in Pyeongchang, the Washington Post reported. Pence dubbed the new strategy “maximum pressure and engagement at the same time.”

Market Excitement Continues

It's still a wild ride if you look at the intraday price graphs, with Monday looked pretty risk-on in the U.S. Stocks surged and the VIX fell to around 25, while the Bloomberg Dollar Index slid for a second day. Traders were still on edge following the tumultuous move in equities last week that wiped $2 trillion from U.S. stocks. Investors are awaiting U.S. consumer-price data due Wednesday with some trepidation, given that pressure on equities has been emanating from the Treasury market and the outlook for inflation. Japan's January PPI report, expected at 2.7 percent, and Taiwan fourth quarter GDP are on the calendar in the Asia session.