Mild Turbulence.

First of all, you should note that Donald Trump has once again done the impossible. He has managed to turn George Bush, easily the stupidest man to ever occupy the Oval Office, into a regular Abraham Lincoln by comparison. Here’s Bush, delivering what amounted to an anti-Trump manifesto at a George W. Bush Institute event in New York on Thursday:

 

I imagine Trump’s suggestion that Bush didn’t call the families of fallen soldiers didn’t do much in the way of dissuading George from making those comments.

Things were (mostly) quiet on the Trump front on Thursday with the exception of a characteristically insane barrage of predawn tweets, that found the President asking whether the FBI and Russia colluded to frame him for hiring hookers.

 

And then, just when we thought we were going to make through the whole day without a circus, some turbulence hit. John Kelly held a press conference that was so outrageous we could barely find the words to describe it – but we tried (see here).

Speaking of turbulence, we got some overnight with Catalonia and Hong Kong (more below). And although futs took a hit in the wee hours…

Futs

… stocks found their footing after stumbling at the cash open and the Dow hilariously managed to erase a triple-digit decline to close green:

Dow

As far as the dollar and yields, this is probably what you should focus on (it hit right at the close):

  • POLITICO CITES THREE UNNAMED ADMIN. OFFICIALS ON POWELL FAVORED
  • TRUMP SAID TO BE LEANING TOWARD POWELL FOR FED CHAIR: POLITICO

So that’s obviously dovish and the effect was immediate:

DollarYields

Worst day for European shares in a while, as Spain is set to suspend Catalonia’s autonomy, setting the stage for God only knows what kind of backlash:

SX5E

The euro dipped on the Catalonia news, but recovered:

EuruSd

Something snapped in Hong Kong overnight as the Hang Seng plunged nearly 2% in the final minutes of trading…

Hangseng

… for its second-worst day in nearly a year…

HangSeng2

Needless to say, this raises questions about Friday. Here’s a good bit of color from Bloomberg’s Michael Regan:

The open of Asian equity markets tonight should be interesting since Hong Kong’s Hang Seng Index led today’s risk-off trading. (OK, maybe it was a slight turn of a dimmer switch rather than an off/on switch). Looking at Bloomberg’s correlation finder function to find markets linked to Hong Kong, there are a few surprises. For example, Britain’s FTSE 100 has a +0.41 correlation to the HSI, which is not exactly a handcuffed relationship but higher than the Shanghai Composite’s at +0.38. Switzerland’s SMI, Russia’s Micex, and Sweden’s OMX also have positive correlation coefficients of at least 0.3% over a 120-day period. In currencies, the looney, Swiss franc and yen all have weak but positive correlations of about 0.2% and the Bloomberg Dollar Spot Index comes in at +0.15.  As far as negative correlations, not surprisingly China’s sovereign CDS is the strongest on the screen at -0.41, with Australia, Russia, Brazil and German CDS also showing negative (but weaker) links along with gold and the Brazilian real.

The Nikkei notched a 13th consecutive gain, the best run since March 1988:

Nikkei

Also worth noting (but lost in the shuffle unless you’re an FX trader), the kiwi tumbled on political turmoil:

Kiwi

If you’re focusing on commodities for EM equities, you might want to consider the correlation with tech going forward (whether that’s a good or a bad thing you’ll have to decide for yourself):

EMTech

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