Into The Wild Blue Yonder.

Ok, well there were some notable headlines to start the week, including this one:

TRUMP: U.S. TO DESIGNATE NORTH KOREA A STATE SPONSOR OF TERROR

So that’s fun, as is the following tweet which underscores the fact that yet again, Trump has no idea what he’s talking about:

Trump says that North Korea should have been labeled a state sponsor of terror "a long time ago, should have happened years ago."

It did. North Korea was added in 1988. Removed in 2008 by George W. Bush. pic.twitter.com/SH9LJX1Yjx

— Kyle Griffin (@kylegriffin1) November 20, 2017

Additionally, Yellen made it official – she will ride off into the wild blue yonder once Powell is sworn in:

Unfortunately there was no “PS: fuck you very much” at the end.

It was largely a nothing day for the benchmarks. Dow and the Russell did ok, with the latter the outperformer on the session. Nasdaq was basically flat.

Treasurys sold off and that lent support to the dollar…

…but don’t go getting any ideas about reflation optimism because the curve flattened again with the 5s30s inside 70bps:

Gold careened lower as the dollar rose:

High yield stabilized further on Monday. The spread on the Bloomberg Barclays U.S. junk index looked to close below 360bps for the first time first time in almost two weeks.

Tough day for Angela Merkel and thereby for all of us who understand that she is the last bastion of sanity in a world inhabited by characters from an Austin Powers sequel.

The German drama left a sour taste in everyone’s mouth right off the bat in Europe, but by the end of the session, everything was fine with all the major indices closing green.

Part of that was probably attributable to the euro which started falling again after the European open. EURUSD ended up near the overnight lows after staging a ridiculous rebound off the initial Sunday evening knee-jerk:

Ultimately, the Chancellor would tell broadcaster ARD the following:

A minority government isn’t part of my plans. I’m certain that new elections are the better way.

So we’ll see.

On Sunday evening, in our week ahead preview, we said the following about Turkey (the country, not the bird you’re going to rip apart with your family this week in celebration of the time a bunch of white men got lost on a ship and then spent the next two hundred years committing genocide):

And speaking of EM, don’t forget that there’s all kinds of trouble on the Turkey front. This Reza Zarrab boondoggle is spiraling rapidly out of control and it looks as though Robert Mueller is going to end up trying use the former gold trader to implicate Michael Flynn and Erdogan in a plot to kidnap the latter’s arch nemesis Fetullah Gulen. If you think relations between Washington and Ankara are strained now, just wait until this boils over. With the lira already on the back foot, there’s significant headline risk here, especially given that Erdogan was back out on Friday blaming high inflation on monetary policy that’s not loose enough (and no, there are no typos there).

That was borne out on Monday as the lira slid near an all-time low against the dollar. This is completely out of control and the CBRT NDF scheme isn’t doing anything to calm the market:

10Y yields surged above 13%, another record high.

More generally, emerging markets held up well, as MSCI’s EM FX index rose for 5th day and EM equities tacked on a third day of gains, making the five-day losing streak that ended last week a distant memory. EEM implied vol. is now nearing its lowest levels this month:

Chinese shares got off to a decidedly rocky start overnight coming off their worst week since August. Obviously, the catalyst was Beijing’s new effort to rein in shadow banks and specifically AMPs with a new set of rules. We kinda figured the plunge protection team might be necessary (and remember, “PPT” is not a conspiracy in China – there is a literal plunge protection team over there):