It Could Have Been Worse – A Lot Worse.

Well I’ll say this for Wednesday’s U.S. session: it could have been worse.

The setup was terrible, with falling commodities, a downbeat Asian session, and junk jitters weighing on sentiment. On top of that, Trump is back in the U.S. So you know, we had lots of things conspiring against us on Wednesday.

First 0.5% drop for the S&P in 51 sessions:


Triple-digit decline on the Dow. Mercifully, HYG and JNK managed to rebound off their intraday lows to close flat.

For his part, Bill Gross “isn’t calling for a bear market”, he just thinks this is an old folks’ home where “activity – and prices – are going to slow down.” And Bill is a guy who knows about old folks’ homes.

Bull flattening in the curve today with the 5s30s reaching as low as 73.7bp, another new “flattest since 2007” moment (these are a daily occurrence):


Crude fell again, after the EIA report betrayed a second straight build in U.S. crude inventories while production jumped to new record. Oh what a difference 10 days makes:


European stocks fell broadly, with the Stoxx 600 falling for a seventh consecutive session:


Do note that the euro’s recent strength is now compounding an already deteriorating situation:


The IBEX just barely avoided falling for an 11th consecutive session:


Spanish stocks have been hit hard of late, with the IBEX near its lowest since mid-March, and off some 12% from its peak in May. It trades below both its 50-DMA and 200- DMA.

I’m reasonably sure no one cares about this right now, but keep an eye on the krona and the krone. Because they are getting near their weakest levels versus the euro since the crisis:


“SEK, NOK, CAD and AUD have all weakened vs EUR lately,” Nordea’s Ole Hakon Eek-Nielsen writes in a note, adding that “these are currencies of four countries that all have experienced a real estate boom for several years, which seemingly is coming to an end now.”

Speaking of shit that’s falling versus the euro, the beleaguered lira hit yet another new low versus the common currency on Wednesday:


We’ve said this a lot over the past couple of weeks, but we’re going to say it again: Turkey is in trouble. The CBRT is now going the NDF route, similar to Mexico. The yield on Turkey’s 10-year lira bonds jumped as much as 13bps today to a record 12.49%.

Emerging market equities have fallen for five sessions in a row and the unnerving thing there is they’ve still got a ways to go before catching down to emerging market credit. Additionally, volatility on the EM ETF is on the rise.


Overnight, the Nikkei fell for a sixth day, falling the most since March:


Chinese shares stumbled as did the Hang Seng.

So yeah… it could have been worse stateside. A lot worse.


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