Why Futures Are Lower: JPMorgan Summarizes The Chaotic Overnight Session

As traders get to the their desks this morning after a 3-day weekend, only to find a market bombarded by a barrage of overnight news from around the globe even as Theresa May is currently delivering her Brexit speech, (so far the most impotant thing she has said is that both houses of parliament will vote on Brexit, leaving a door open that Brexit may not happen at all), here courtesy of JPM's Adam Crisafulli is a recap of all the chaos that has taken place so far.

Market update – it was a very busy holiday weekend in the US w/a slew of Trump remarks (on foreign and domestic matters), Brexit worries, an update on Chinese growth, OPEC rhetoric, and more.


The net result of everything is generally weaker risk asset price action – Asia was weak Mon and mixed Tues while Europe is now tracking down >1% WTD. US futures are off ~12-13 points (about ~55bp).


Trump’s remarks on border taxes are the single most important/incremental piece of news from the perspective of US equities (given that tax reform has prob. been driving ~70% of the Trump/Ryan enthusiasm) – ostensibly the absence of border taxes is a “positive” but it also reflects 1) the relatively inchoate nature of the overall tax reform effort (which suggests progress may not come for several months at least) and 2) it suggests the headline corporate rate may not move as low as Ryan (20%) or Trump (15%) want as the border adjustment revenue was a necessary offset.


Trump’s tone on foreign policy matters (he expressed indifference towards the EU, calling it a vehicle for German interests, and labeled NATO “obsolete”) set off alarm bells throughout Europe (and among participants at Davos); while markets are focused (somewhat myopically) on the financial/economic implications of Trump, the geopolitical risks associated w/not only the President Elect but also various global shifts now underway remain very underappreciated.