Sterling fell, equities slid, Chinese markets got a helping government intervention hand again, and gold climbed over concerns U.K. Prime Minister Theresa May is prepared to lead Britain out of the European Union’s single market and as the U.S. President-elect suggested other countries could break from the bloc.
It was a night of painful fireworks for China bears, who experienced the overnight offshore Yuan deposit hitting a record 80%, while the USDCNH tumbled as low as 6.78, resulting in a 2.3% move in 2-days: the biggest such jump in the CNH on record.
According to a recent report by Ritterbusch, US drillers are returning to work at a far faster than anticipated pace. This would allow US producers to grab "a significant portion of OPEC's market share," and could cause the OPEC production cut/freeze agreement to break apart as early as next spring.
"Markets don’t have a purpose any more - they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable..."
As Goldman warns, should US 10-year rates move above the bank's ‘fair value’, "this would represent a threat to risky assets." Well, 10-year yields are now at what Goldman estimates is "fair value", which means any additional increases from here could lead to a stock market selloff.
"With a 4.6 percent unemployment, and a solid labor market, there may be some additional slack in labor markets, but I would judge that the degree of slack has diminished. So I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment."
"We’re getting to the point where further rises in Treasuries, certainly above 3 percent, would start to have a real impact on market liquidity in corporate bonds and junk bonds. Also, a 10-year Treasury above 3 percent in my view starts to bring into question some of the aspects of the stock market and of the housing market in particular."
"I sometimes feel like ‘The Grim Reaper’, scouring the research savannah in a ghoulish quest to harvest bad news with a forceful sweep of my scythe. Imagine then my perverse delight when our credit team produced what is one of the scariest charts I have seen for a very long time." = Albert Edwards
European and Asian markets rose, while U.S. index futures were little changed, with the Dow Jones Industrial Average pushing for yet another record, as traders digested the Italian referendum news, await the ECB's Thursday announcement and reflect in a notably quieter overnight session. Oil slipped from a 16-month high after 4 straight days of gains.
Industrial metals commodity prices plunged by the most since March in the last 2 days as China’s exchanges (once again) clamped down on speculation by tightening trading rules. As Bloomberg reports, for the second time this year, trading has exploded on the nation’s exchanges, pushing prices of everything from zinc to coal to multi-year highs and sending authorities scrambling to deflate the bubble before it bursts.
"... we believe that the equity market is still at a level that can cope with moderately rising bond yields. We estimate that a rise in US bond yields above 2.75% or probably between 0.75-1% in Germany would create a more serious problem for equity markets: at that point we would expect that any further rises in yields from there would be a negative for stock returns." - Goldman Sachs
On Sunday two former prime ministers - Fillon and Juppe - are facing off in a runoff vote for France's center-right presidential nomination, with the victor expected to face a showdown against a resurgent Marine Le Pen in the May 2017 presidential election. Voting opened at 8 a.m. and was set to close at 7 p.m., with the first results likely up to an hour and a half later.
Unable to spend or deposit their sackfuls of large bank notes amid India’s crackdown on hoarding cash, business owners across the country are paying employees months of salary in advance, ringing up bogus sales and even buying gold they can smuggle overseas to get rid of stashed money or conceal its source.