Risks Aplenty.

Monday was largely the same old story for markets. There are signs of policy uncertainty everywhere you look with the most obvious example stateside being Trump’s ill-advised decision to jeopardize tax reform for the sake of defending his honor.

Geopolitical risk came calling on Sunday as a simmering feud between Washington and Ankara finally came to a head with predictably bad consequences for Turkish assets.

But generally speaking, markets weren’t fazed. U.S. stocks were marginally lower in holiday-thinned trading. Small caps underperformed (perhaps not surprising given what happened over the weekend on Twitter):

People are super excited about the global upturn in manufacturing – remember what that looks like? Here:

How excited are investors? Well, excited enough that they dumped $1.35 billion into the Industrial Select SPDR Fund last week – as Bloomberg’s Sid Verma notes, that’s second only to the record inflow seen after the U.S. election:

European shares were mostly higher, but closed before this hit:

• CATALANS ARE SAID TO APPROACH SOCIALISTS WITH BID TO OUST RAJOY

Also this:

• CATALAN PRESIDENT TO DECLARE GRADUAL INDEPENDENCE: EFE

So that’s obviously something to watch this evening and tomorrow.

The Turkey ETF was a horror show for obvious reasons:

The lira plunged, as the market frets over the escalating diplomatic crisis between Erdogan and Washington (worst day since the coup):

For his part, Erdogan says he’s “very saddened”…

lol ERDOGAN: U.S. VISA DECISION `VERY SADDENING' pic.twitter.com/yT0L5hmNzX

— Heisenberg Report (@heisenbergrpt) October 9, 2017

And to prove it, he arrested someone else. Turkey issued a new arrest warrant for an employee of the U.S. consulate in Istanbul, AHaber reported this morning.

The pound got some much needed relief (it was sitting at a one-month low) on Monday, rising on renewed BoE rate hike speculation (itself the product of revisions to U.K. employment data) and reports suggesting that May may demote Boris Johnson.

Gold was higher on the day, recouping last week’s losses:

Mainland Chinese shares played catch up after the week-long holiday. The rally faded into the close with banks struggling to sustain early gains. Here are the details on the banks via Bloomberg:

• Industrial & Commercial Bank of China Ltd. A shares jumped 5.5%, the most since November 2015, but trimmed gains to 1.7% at the close; ChinaConstruction Bank Corp. pared a 4.3% advance to 0.7%; Agricultural Bank of China closed down 0.8% after rising as much as 2.9%

This of course comes after a week that saw Hong Kong shares soar as investors celebrated the RRR cut. For its part, the Hang Seng took a breather.

Also notable, we got Chinese FX reserves on Monday which rose for an eighth consecutive month and remain above the psychologically important $3 trillion level.

As a reminder, China’s FX reserves were the only data point worth watching in late 2015 and early 2016 as they were a barometer of yuan depreciation sentiment and therefore spoke volumes about the severity of capital flight. Between the stronger yuan and “effective” (scare quotes are there for a reason) capital controls, the pressure has eased.

Speaking of the yuan, the offshore yuan gained all the way to a high of 6.6095/USD in afternoon trading bolstered not only by the FX reserves number but also by a stronger-than-expected CNY fix. The yuan was the best- performing EM currency on a day when it would have been easy to be nervous given the problems in Turkey.

And now back to your regularly scheduled programming which, if you’re in the U.S., looks like this…