As it dawned on markets that they had been caught dead wrong for the second time in half a year, first with Brexit and then with the historic election of Donald Trump, their reaction was identical: a slow selloff at first, followed by a furious dump, which led to a limit down halt in NASDAQ and Emini future trading. However, turbulence calmed as investors reassessed the effects of Donald Trump’s surprise victory in the U.S. presidential election.
There seems to be a growing assumption that the elites have finally figured out how to turn a capitalist system into a perpetual motion machine by having central banks buy up all financial assets. This is classic “peak of the cycle” thinking, and the more widespread it becomes the closer the system is to breaking down.
US Index futures, together with European and Asian shares surged after the FBI cleared Hillary Clinton one last time of her handling of emails as secretary of state which it repeated wasn’t a crime. Oil, gas rise, together with most industrial metals; the yen and Swiss franc retreated with gold, silver and other flight to safety assets.
With yesterday's, 8th consecutive decline for the S&P 500, the US equity market has now posted the longest losing streak since October 2008; and should we close payrolls Friday day with another negative print, it would be the longest negative streak since December 1980. Putting the recent slide in context, stocks are now down compared to a year ago, and are unchanged since December 2014.
Equity market implied correlation is flashing a 'panic' warning according to BMO quant Mark Steele as the little-known derivative indicator suggests traders fear a major 'high correlation' event and are aggressively hedging systemic risk.
Global stocks, S&P futures, the Mexican peso, the Korean Won and crude oil all fell as traders were spooked by polls suggesting a tightening race and Trump momentum ahead of next week’s American presidential election. The yen and Swiss franc gained, as did global bond markets and gold as investors flocked to safe haven assets.
With October, the worst month for stocks since January, now in the history books S&P futures are eager to telegraph that the streak of five consecutive will end, with a modest gain of 0.3% in overnight trading, coupled with mixed global markets as the global bond selloff returned after strong Chinese economic data prompted concerns about rising global inflation.
Now that October is officially over we can close the deal books and do the math: according to Dealogic, it was a record month for dealmaking, smashing all previously records with just over half a trillion dollars, or $500.1 billion, of mergers and acquisitions announced globally.
Asian shares traded mixed, European shares slid while US equity futures posted a modest rebound after Friday's surprising political news that the FBI reopened its probe into Hillary Clinton, after OPEC failed to agree supply cuts at a meeting in Vienna.
"I believe 2017--2021 will represent the end and reversal of that multi-decade trend - as the debt bubble bursts and bond markets begin to crash... Each phase was a desperate battle between centralized, governmental control of currency versus universal, hard-asset based currency. And each phase saw the acceleration and intensification of that battle take hold in the ‘7’ year."
US treasury yields are extending their earlier spike (from UK GDP) with 30Y up 5bps on the day (and the curve steepening). While historical correlation between stocks and bonds has come in a little, it appears risk-parity unwinds are also hitting as US equity markets have dumped at the open also...
European, Asian stocks fell while S&P futures rebounded as investors assessed a mixed batch of earnings reports while the dollar strengthened to 9 month highs versus most of peers on rising confidence that the Fed will raise rates this year, pushing global bond yields higher.