In a report confirming that the ECB is preparing for a rerun of a post-Brexit scenario, Reuters writes that the ECB is ready to temporarily step up purchases of Italian government bonds if the result of next Sunday's crucial referendum "rocks markets" and sharply drives up borrowing costs for the euro zone's largest debtor. BTP futures briefly spike higher, gaining ~30 ticks in 2 minutes, to session high of 135.46 following the news.
In recent weeks, China’s central bank has effectively tightened monetary conditions based on the shifting composition of its repo operations. As a result, the local bond market is getting increasingly nervous as selling - first of bonds, and then of equities - is expected to accelerate in response to what appears to be China's (not to) stealth tightening of financial conditions.
European shares dipped and U.S. equity-index futures (-0.3%) pointed to a lower open as traders questioned the stability of the Italian banking sector ahead of next weekend's referendum as well as the longevity of the Trumpflation rally, pressuring the dollar. "It's a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back U.S. bond yields and that is leading the consolidation in the dollar.. there is more scepticism about an (OPEC) output cut now."
Among international stocks, Apple, Microsoft and Exxon were the GPIF's top stock investments at the end of September, while Japanese government bonds, U.S. Treasuries and Italian debt were the largest bond holdings.
Having soared to fresh 13 year highs in a quiet overnight session on thin liquidity due to the US Thanksgiving holiday the dollar pared back its weekly advance with modest profit taking after traders wondered if the rally has gotten "too stretched." European shares were fractionally higher, with Asian stocks and US equity futures rising and both the Dow Jones and the S&P set for new all time highs.
The market barely had time to respond to today's surprising rate hike by the Turkish central bank, when an even more unexpected development took place in the European Parliament which voted overwhelmingly to temporarily freeze talks on Turkey’s bid to join the European Union, citing deteriorating human rights and democratic standards under President Recep Tayyip Erdogan’s rule.
"...who knows, maybe magic will happen. After all if the 2016 political season has proven anything it is this: Anything is possible... But buyers here with the S&P 500 near 2,200 seem to think that's a 100% guarantee. Best of luck..."
"The paradigm has shifted in terms of inflation. Long-end interest rates are dangerous. Make sure you are being really careful about the long-end exposure as we saw this week." - Rick Rieder, CIO for global fixed income at BlackRock.
Gold ETF Holdings have collapsed by 1.93 million troy ounces in the days since Donald Trump's election. This is the biggest decline since July 2013, a period when gold prices plunged to $1200 before ripping almost 20% higher in the next few weeks.
More of the same this morning as the dollar extended its advance on the still undeteremined Trump reflationary policy measures after Yellen signaled an interest-rate hike could be imminent, while bond yields around the globe rose again, metals declined, European stocks advanced and futures were modestly in the red just shy of all time highs.
Even if Mr. Trump’s administration does not buy wholesale into the neo-isolationist ideology he espoused during the election campaign, it won’t simply champion the cause of the globalists. As a result, the European integration project will be deprived of its most powerful intellectual and political advocate.