Traders came to work today ready to make risk great again.
Florida, Japan and Seoul all still existed come Monday morning and that was a good enough reason to put all the trades on that nobody wanted to risk carrying into the weekend.
The S&P rose the most since April to an all-time high:
Yields and the dollar both rebounded, with the former rising some 5bp-8bp across the curve from Friday’s close. As Bloomberg notes, a soft 3Y auction ensured yields ended near session highs.
Gold fell sharply after hitting a fresh 12-month high late last week:
Insurers and financials more generally rebounded as Irma fears abated:
Florida-based Heritage Insurance soared, up more than 20% on the day:
A chorus of analysts last week suggested that some of these names had sold off too much. For instance, KBW’s Meyer Shields wrote on September 5 that investors should consider buying UVE, FNHC, HRTG and HCI amid overblown Irma fears.
European shares rallied across the board, rising the most since early July:
Best day of the year for Swiss Re:
The dollar rose against a handful of peers as yields rose:
Notably, the greenback held onto gains versus the yuan, as the PBoC confirmed reports that it’s removed the reserve requirement on forwards. Between that and the weaker-than-expected Monday fixing, the central bank appears to have temporarily halted the currency’s seemingly relentless appreciation against the dollar:
“Now that depreciation pressure on yuan has faded, policy makers will want to introduce more uncertainty about the currency’s outlook and prevent expectations of one-way move,” Capital Economics wrote on Monday. This is a great time to remind you about what we said just six short days ago:
We still maintain that it’s just a matter of time before they step in and stop this. That’s not to say the medium-term trend won’t be a stronger yuan and it’s certainly not to suggest that the PBoC is eager to upset any apple carts ahead of the Party Congress next month. It’s just to say that if there’s anything the PBoC hates, it’s the idea that market participants think the currency is a one way trade. And this is becoming a one-way trade.
Needless to say, the yen suffered with USDJPY at one point rising the most in at least 8 months:
A falling yen and the fact that no missiles were fired in Japan’s general direction over the weekend made Japanese stocks happy as the Nikkei and the Topix surged.
Now stay tuned to find out if Kim bought some VXX today on the cheap so he can fire off an ICBM this evening and make a few million to put towards his next H-bomb.