Recall our closing thoughts from Monday’s market wrap:
And now back to your regularly scheduled programming which, if you’re in the U.S., looks like this…
Well true to form, it was an absolute circus on the U.S. political front on Tuesday, with Trump challenging Rex Tillerson to an IQ test, lambasting an ESPN anchor while simultaneously spelling “mic” wrong, accusing Democrats of not caring about the safety of the country, and then imagining that The New York Times set up Bob Corker who Trump labeled “Liddle Bob” during an hour-long (roughly) Twitter tirade that started before sunrise.
Later, the White House trotted out Sarah to explain how, contrary to… well… contrary to reality, Trump’s foreign policy has “created calm around the world.” No, really:
Speaking of “calm around the world”, or a lack thereof, Catalonia kinda, sorta declared independence today, but Puigdemont decided to put things on hold for “weeks”, an outcome which presumably allows him to remain a free man.
So markets dodged a bullet there, although Madrid says it considers Puigdemont’s speech a declaration, according to El Pais. And then this, out after the bell:
CATALAN LAWMAKERS SIGN DECLARATION OF INDEPENDENCE: AP
CATALAN LAWMAKERS DELAY IMPEMENTATION OF DECLARATION: AP
— Heisenberg Report (@heisenbergrpt) October 10, 2017
U.S. stocks rose, helped along by Walmart which soared on all kinds of good news. Bob Pisani was so excited this morning he seemed on the verge of wetting himself. Take a look:
Three down days in a row for the dollar as markets fret over whether Trump’s ongoing feud with “Liddle Bob” has torpedoed tax reform:
The euro rose to its highest in since late last month against the dollar, logging its third day of gains after Catalan President Carles Puigdemont decided he’d rather suspend the result of the independence referendum for “weeks” and call for “a period of dialogue” as opposed to getting himself arrested:
But it was too late for Spanish equities which closed down nearly 1% prior to Puigdemont speech. It’s been a rollercoaster since the referendum:
WTI rose the most in two weeks as the Saudis are set to implement the deepest cut ever in November. Apparently, Saudi Arabia and Russia are going to try really, really hard to balance this market. Oh, and the weaker dollar isn’t hurting either. WTI’s back above $50:
In Japan, the Topix closed at its highest since July 2007 while the Nikkei rose for a sixth consecutive session, in the longest streak since December:
Meanwhile, South Korean shares shook off any worries about the North, rising 1.6% coming off the holiday. That’s the best day since May:
The yuan is riding another hot streak, with USDCNH falling through 6.57 after the PBoC’s Zhou suggested that China needs to “comprehensively” move ahead with opening its economy and pursuing yuan rate reforms while also relaxing FX controls. You should note that we’re starting to retrace the weakening trend put in motion early last month when the PBoC dropped the reserve requirement on forwards:
Here’s some further color from Bloomberg:
- Offshore yuan rose the most in two days since early January, and outperformed EM peers during Tuesday trading in New York.
- The CNH rally was driven by a pent-up supply of dollars from exporters, according to New York-based trader; Bloomberg’s replica of CFETS RMB Index rose to the highest level in almost a month
- The last time the yuan saw a move like this was at the beginning of the year when the agent banks conducted intervention, according to CommerzBank economist Hao Zhou; this time around the market believes yuan will stay relatively stable ahead of Party Congress
- USD/CNH risk reversals, which show bearish bets on the yuan, have dropped to negative in short tenors; the drop reflects market expectations for yuan to appreciate in the near term