Ashes To Ashes: Surveying The Fallout 24 Hours Later

Ok, so “what hath Trump and Kim wrought?”

Let’s start with the markets closest to the rogue regime with the nukes.

It was the worst day since May for Japanese shares:

Nikkei

And vol. on the Nikkei spiked the most since 2015:

Nikkei

The won fell sharply, dropping to a 4-week low:

USDKRW

The Kospi fell more than 1%, extending a 2-day decline, and as you can see, you could make an argument that the near-term top may be in:

Kospi

And don’t forget, this comes after massive inflows into South Korean shares:

KoreaInflows

Investors in the U.S. did some dip buying and the damage was contained on Wall Street:

USStocks

And why not, right? After all, everything is so “cheap”:

P:B

The VIX has remained elevated following Trump’s Tuesday afternoon ad hoc nuclear threat:

Bigly

All the drama is of course weighing on yields and the dollar. The greenback tried to rally but couldn’t hold on:

Dollar

Treasuries gave up some of their rally (i.e. yields rose) after a poor 10-year auction, but generally speaking, you can tell the geopolitical/policy turmoil is taking a toll:

UST

Gold is holding near its highest levels since early June on safe haven flows:

Gold

Equities were lower across the board in Europe, with French shares leading the way down:

Europe

Emerging market stocks were lower by 1%:

EEM

High yield credit fell for the third straight day:

HYG

But you should probably buy some more junk bonds and throw some EM corporate debt exposure in there too, because as you can see, there quite literally isn’t any risk according to markets:

EMHYOAS

Oil struggled to find direction after conflicting signals from the EIA report which showed crude stockpiles drawing for a 6th week, but also showed a disconcerting gasoline build.

WTI

“The decline in crude inventories was constructive, [but] the market’s a little bit disappointed that we saw a gasoline build [because] in normal course, we’d still be getting declines because you’re in the middle of summer driving season,” Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors, said earlier on Wednesday.

Notably, the yuan is now trading like a safe haven as traders seem convinced that tight capital controls and PBoC determination will be enough to trump (pun kinda, sorta intended) the possibility that China is about to have a failed state on its border:

Yuan

“Part of the move was attributed to the technical break at 6.7. It’s a relatively-high yielding currency yet it’s behaving like a haven asset, regardless of the geopolitical risk on its border,” Bloomberg’s Ye Xie wrote this afternoon, adding that “it seems investors are confident that Beijing will keep the yuan stable in the case of escalating tension in the region, which won’t be an outlandish idea.”

As you ponder all of this, don’t forget to buy the nuclear war dip…

CMC

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2 thoughts on “Ashes To Ashes: Surveying The Fallout 24 Hours Later

  1. Holy sh*t, there better be high level discussions going on right now between the smarter Chinese and US adults. Well I guess these markets aren’t as bullet proof (pun intended) as we have been led to believe.

    Like

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