Wednesday, 5 December 2018

The trade truce didn't last long


Stocks Sink As Trump Confirms Trade War Not Over: "I'm A Tariff Man"


US equities are tanking at the open, led by Dow Transports (autos) following a confirmation from White House economic advisor Larry Kudlow that if a deal is not reached with China within 90 days, then the trade-war will re-escalate.

Pointedly, Kudlow said that if a deal with China is not reached then US would increase tariff rates to 25%, adding that Washington could add to that.
Stocks don't like it...


Bloodbath - From Triumphant Truce To Deal Dysphoria In 36 Hours



4 December, 2018


European Stocks continued to give back Sunday night gains...

US Equity indices rapidly erased not just Sunday night gains but Friday afternoon's pre-emptive push and Wednesday's Powell Put levels...
The Dow vigilantes have managed to get both a Powell put and a Trump put for the market,” said Ed Yardeni, lead strategist at his namesake research firm. “Jerome Powell turned into Santa Claus last Wednesday, markets certainly reacted joyously to his hints that Fed tightening would occur at an even more gradual pace. So if Jerome Powell is Santa Claus, then the two elves are President Trump and President Xi.”
But the Grinch just took that all away... From Friday's close...
On the day, Trannies worst day since Brexit, but it was all a disaster...
Dow down 800 points!
The S&P stalled at 2800 once again and completed a triple top of lower highs...
All major indices crashed back below their key technical support levels...
TICK shows the massive sell programs hitting as stocks broke key technical levels. Momentum stocks collapsed...
Trannies and Small Caps are back in the red for 2018.
Bank stocks have been battered, tracking the curve lower...
For some context:
  • Global Systemically Important Banks are down 30% from 52-week highs.
  • US Financials down 14.5% from 52-week highs.
  • Goldman Sachs is down 33% from 52-week highs.
And regional banks crashed most since Brexit...
But while banks were busted, FANG stocks got monkey-hammered... back into bear market (down 22% from 52-week highs)
(FB -36%, AMZN -17%, NFLX 34%, GOOGL -17%. AAPL -24%)
Stocks plunged back to bond's reality...
Treasury yields tumbled today with the long-end dramatically outperforming and collapsing the yield curve...
The 10Y TSY yield plunged below 2.90% intraday...
But if Cyclicals (rel to Defensives) are right, 30Y Yields have a long way to go...
And Long Bond futures broke back above their 200DMA...
The yield curve collapsed too with 2s5s, 3s5s inverted and 2s10s into single-digits...
All of which brought out a herd of asset-gatherers and commission-takers to explain how this is a dip, not an inversion... or that it's different this time because of central bank intervention... not it is not!!
And the Eurodollar curves are now pricing in an extremely dovish trajectory...
Massively decoupled from The Fed's guess...
Credit markets smashed wider today and equity protection soared (VIX>21) playing catch up...
The dollar repeated yesterday's fund by diving overnight and ramping from the European open... (note it remains lower from Powell's Put last Wednesday)...
The offshore yuan exploded higher (near 3-month highs)...but began to fade this afternoon after tagging september highs
But the Turkish Lira was hammered today...
Cryptos were also slammed today led by
PMs managed modest gains on the day as Crude and Copper rolled over...
Gold held on to gains as oil slipped ahead of tonight's inventory data...
Finally, the biggest picture of all signals that volatility is coming... just like winter...
And with markets closed tomorrow, we suspect this is the scene on many trading floors...


Stocks nosedive, Dow sheds nearly 800 points


Stocks nosedived as a slew of concerns over trade tensions and an inversion in part of the U.S. yield curve spooked investors.

The S&P 500 (^GSPC) fell 3.24%, or 90.31 points, as of market close, with banking stocks leading declines. The Dow (^DJI) slid 3.1%, or 799.36 points, nearing the lowest levels of the session. The industrial bellwether Caterpillar (CAT) was the index’s worst performer, falling 6.93% to $129.32 per share as uncertainty over U.S.-China trade policy continued to brew. The Nasdaq (^IXIC) fell 3.8%, or 283.08 points.

It seems to me that there’s lots of technical trading going on. And technical trading is being more headline-driven than it is fundamentally driven,” Jamie Cox, managing partner for Harris Financial Group, said in an interview with Yahoo Finance. “It’s more confusion by the markets about what direction things are actually going to take. In the absence of any clarity the worst case scenario is going to be the one that’s going to get the most attention.”

Equities sharply reversed course after posting a strong session on Monday. Investors’ risk appetite had increased after President Donald Trump and Chinese President Xi Jinping’s meeting over the weekend at the G20 summit produced a 90-day halt to new tariffs, briefly tempering concerns of trade tensions between the U.S. and China.

ceasefire announced over the weekend overtook early investor optimism for the 90-day tariff hold. The Trump administration and Chinese government have continued to provide conflicting reportsover the specific terms agreed upon following the G20 summit over the weekend.

Markets don’t believe that the deal (Trump) struck with China is as solid as what he suggested it was after the meeting concluded,” Cox said. “Until which time China confirms it, markets are not going to react positively.”

The bond market, for its part, began the month by flashing a recessionary warning sign. An inversion of a section of the U.S. Treasury yield curve occurred for the first time since 2007 on Monday, with the yield on the 5-year Treasury note falling below the yield on the 3-year note. An inversion also occurred between the yields on the 2- and 5-year notes, meaning that investors were paid more to hold the U.S. government debt with the shorter maturity.

This in part helped send equities into a sell-off as investors feared a similar inversion of the closely monitored 2- and 10-year yields. An inversion of the 2- and the 10-year yield has preceded every U.S. recession since World War II. However, the difference between the 2- and the 10-year yield remains upwardly sloped, albeit flattening. As of 4:15 p.m. ET, the difference between the 2-year and 10-year yields narrowed to 11.5 basis points, having hit the lowest level in more than 11 years intraday on Tuesday.

I think markets are misinterpreting what the yield curve inversion actually means,” Cox said. “You’ve seen banks and other financial institutions really get hit thinking that recession is much closer than what had originally been predicted and that interest rates would not only stop going up but have to be cut, so the reaction of financials has been rather dramatic.”

The SPDR S&P Regional Banking ETF (KRE) tracking shares of regional financial institutions fell more than 20% from its all-time high from June on Tuesday, while shares of national banks including Bank of America (BAC), Morgan Stanley (MS) and Citigroup (C) each closed lower by more than 4% for the session.

Trade was the “linchpin” of Tuesday’s equity selloff, Jim Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein, said in an interview with Yahoo Finance. “I don’t think you have a yield curve problem unless you have a trade problem,” he added.

If we have a trade problem, I think that risks bringing a number of developing economies to the brink of recession. It also puts a huge tax of U.S. consumers, and the combination of those two means a pretty meaningful global slowdown, which would indicate that right now the yield curve is correct in terms of where we’re going,” Tierney said. “It really is quite binary.”

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