"These were the cowboys of Wall Street," said Peter Henning, a law professor at Wayne State University in Detroit. "If you were a bond trader, you could almost do anything you wanted, and not anymore."
After two days of back to back triple digit gains in the Dow for the first time since the election, overnight the torrid rally has faded, with European shares and U.S. stock futures little changed ahead of Trump's big unveil of his much anticipated tax cut plan as investors seek new impetus for a flagging relief rally.
World stocks hit a new record high on Tuesday, with investors still cheering Macron's victory in the first round of the French presidential election, supported by speculation about U.S. tax reform and the overnight report that Trump has conceded on the border wall, eliminating a government shutdown as a potential risk.
Would the French parliament go along with relaxing labor laws, cut business taxes? Would the parliament allow a referendum on the Euro? If the answers are no and no, then what’s changed? The real battle over the survival of the eurozone will take place in Italy, not France.
"...there is no factor more critical to risk-asset upside that 'inflation expectations' - which are of course fueled by the price input that is commodities. Looking at those forward prices above, there is 'real' downside coming..."
Despite another liquidity injection and the rest of the world in 'euphoric risk-on' mode over the French election results, Chinese stock, bond, and commodity markets tumbled overnight... as the government cracks down further on credit and shadow banking leverage.
With European stocks on fire, and US futures moving fast to recoup recent all time highs, it is no surprise that Wall Street is feeling particularly bullish this morning. Below is a sample of slleside analyst reaction to Sunday's outcome.
With more numbers coming from the French Interior Ministry, as of 11:31 p.m. local time Macron's lead is growing to 23.61% as more city votes are counted, vs Le Pen 22.20%, with 41 Million votes counted, or 85.4% of the total. The gap is likely to expand as the final votes are tallied.
One should not assume that anyone is actively striving for a crash. But, in view of the negotiations – set to begin in 2018 – on a European fiscal union (implying systematic transfers from the EU’s north to its south), it wouldn’t hurt if Germany and the Netherlands knew what would happen if they did not sign a possible treaty.
Wall Street still exudes widespread optimism that 2017 will provide another year of solid gains for stocks amid stable albeit unspectacular economic growth and only gentle interest rate rises. However, as The FT details, all is not well in reality, and the following seven charts will hearten investors of a more bearish persuasion...