After the best quarter for US stocks since 2015, global equities have started off Q2 on the right foot, despite caution about the upcoming meeting between President Trump and China's Xi Jinping later this week, and Fed Minutes which are expected to be more hawkish than the FOMC statement.
Stocks fell worldwide on the last day of the quarter, with US equity futures pointing to a lower open even as the S&P is set for its best quarter since 2015 amid persistent economic and political uncertainty.
The Trump administration seeking to penalize countries whose currencies it believes are undervalued, according to two people with direct knowledge of the review, "an effort to fulfill the president's campaign pledge to crack down on what he frequently called unfair trade."
Asian shares and oil are lower, European shares are little changed, and S&P futures are fractionally in the red after gaining for most of the overnight session, perhaps troubled by warnings by two Fed presidents who warned that markets and valuations appear frothy, and the Federal Reserve may have to raise rates more times than currently forecast.
"Without movement here, the market is looking increasingly binary, with momentum building again in the ‘disinflation’ camp the longer we stay ‘stuck’ in status quo, ESPECIALLY into the back-half of the year, with the Fed again hiking and the ECB transitioning towards ‘tightening’ as well."
"Now, obviously we have to find a point at which to reestablish modest net short positions and we shall; but not likely today. Today we shall watch how things develop; we are but mice in the fields with elephants at the moment and ‘tis best to stay away from stampeding elephants when at all possible."
Global stocks are lower across the board to start the week, as concerns about Trump's administration to pull off a material tax reform plan finally emerge, pressuring S&P futures some 20 points lower this morning, following European and Asian shares lower, while crude oil prices fall unable to find support in this weekend's OPEC meeting in Kuwait where a committee recommended to extend oil production cuts by another 6 months.
'Long Dollar' trades are currently seen unwinding ‘real-time’ as ‘the world’s most crowded trade’ and ‘reflation’ proxy earlier this evening broke the convergence of both its 200dma and the 76.4% Fibo Retracement of the entire Dollar move since the US election—exposing significant downside. There will be major implications within equities too.
"The problem with everyone leaning in one direction is that they scare easily. When realized volatility has been near all-time lows, trading strategies view assets as less risky, so they lever them up. What the models fail to capture is the speed with which volatility can return."
“You boys were always gonna face this moment,” barked Biggie, sliding into a slow groove."But here’s the thing brotha. The market doesn’t care about health care - you know that. Poor people care about health care. And the market doesn’t care about poor people. No one cares about poor people.” Biggie nodded, smiled, a big golden smile.