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This Means War.

Thursday went swimmingly.

Thursday went swimmingly.

Just about the last thing the market needed as everyone tries to figure out whether there is or there isn’t a Powell “put” was for Trump to do something rash, but no sooner had Jay put the finishing touches on a half-decent performance on Capitol Hill than a “very stable genius” started a trade war.

And look, spare me your incredulity. It’s a miracle we’ve gone as long as we have without Trump triggering some market mayhem. After all, you know what they say about letting toupeed baboons play President: something about don’t let toupeed baboons play President.

 

The headlines were conflicting early on after the tariffs were tipped Wednesday evening.

  • 8:53: TRUMP IS SAID TO ANNOUNCE TARIFFS AT MORNING MEETING: CNBC
  • 10:42: CNBC: TRUMP EVENT AT 11AM WILL BE ON TRADE, NOT TARIFFS
  • 12:30: TRUMP SAYS 10% TARIFF FOR ALUMINUM; TRUMP SAYS 25% TARIFFS FOR STEEL

As a reminder, here’s what’s ultimately at stake:

Trade

And here’s another way to visualize it:

Trade2

Right now, things are resilient:

GSTrade

But as Goldman wrote just a few days ago:

Of course, protectionism is still a risk. In particular, the focus of US trade policy which, so far, has been limited to narrow product categories, would become more concerning if it broadened in scope. Our work suggests that the Trump administration may attempt to appeal to mid-term voters through a protectionist pivot (in either word or deed), potentially directed at China and EM Asia: countries that tend to export to the US goods – most importantly, a wide range of machinery – that may be perceived as competing with US labour. Overall, however, the global trade outlook is still ‘volatile, but strong‘, and supports our view that the dollar can weaken, especially against the currencies of NJA and commodity exporters.

The tariff news tanked everything – plain and simple.

Canada is furious. “Any tariffs on the Canadian sectors would be unacceptable,” Canadian Trade Minister Francois-Philippe Champagne said in Ottawa on Thursday.

Europe is pissed too. “We strongly regret this step, which appears to represent a blatant intervention to protect U.S. domestic industry and not to be based on any national security justification,” European Commission President Jean-Claude Juncker said, adding that “protectionism cannot be the answer to our common problem in the steel sector.”

Gary Cohn apparently understands that:

As do some GOP Senators. “Let’s be clear: The President is proposing a massive tax increase on American families,” Ben Sasse noted, before lambasting Trump’s protectionist bent as “weak, not strong.”

And on, and on. You get the idea. You can see when it started to fall apart:

Tariffs

At one point it got really bad:

Third straight day of losses and, notably, the third straight day of losses over 1%:

SPX

It’s time to update the regime change chart:

regimechange

VIX – 25-handle at one point:

VIX

Damage control, comin’ in hot at 3:40 ET:

Treasurys obviously rallied as the risk-off move gathered steam (remember, there’s still potential for occasional safe-haven bids). The curve bull steepened, but here’s the 10Y just as a snapshot:

10Y

The dollar fell and EURUSD spiked as news of retaliatory measures started to come through:

FX

The tariff news further undercut automakers that were already struggling after reporting lackluster February sales:

CarsFuckMe

AK Steel, U.S. Steel and Century jumped at the open on anticipation that something was coming, then fell sharply after the announcement was purportedly delayed (see the bullet point sequence of events above), and then rallied again once Trump basically frontran his own decision:

Steel

The peso was similarly whipsawed:

USDMXN

Europe was closed by the time shit started to hit the fan stateside, but European shares were already sharply lower. Worst day for the DAX since February 8:

DAX

It really doesn’t look like shares across the pond are in the mood to stage a meaningful rally off the February lows and compounding the problem is the Italian election and the SPD vote in Germany both of which are on Sunday.

Europe

Finally, for your moment of zen, here is White House Press Secretary (and Grimace in a wig) Sarah Huckabee Sanders to explain how Ben Carson has decided to cancel his order for $31,000 worth of tax-payer-funded dining room furniture:

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9 comments on “This Means War.

  1. Big Stevie

    Thanks H! Terrific info.

    As history shows, trade wars have never worked. Currency wars have never worked.

    Currency debasement and profligate spending never end well. Neither do massive debt bubbles – especially when these things are combined.

    So the VSG (very stable genius) is going to MAGA (make America great again) by detonating the BFUB (big fat ugly bubble). I believe we are FUBAR…

  2. Anonymous

    Saying Jean-Claude is “pissed” requires clarification. He likes cognac for breakfast. https://www.telegraph.co.uk/news/worldnews/europe/eu/10929427/Fears-over-Jean-Claude-Junckers-drinking.html

  3. What an idiot. At least do it quietly and not announce it publicly and let it sink in over time and other countries “catch on” over time. Talk about conveying to the enemy our moves. WTF? Dotard!

  4. Clown president. LMAO

  5. Anonymous

    H, two months ago you were bemoaning dollar being devalued (trumps fault you said) now your whining about free trade. Trump is right– we need fair trade in combo with free trade!

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