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(Trade) War And Peace.

Ok, let's just step back for a second and take stock of everything that's happened in the past 72 hours.

Ok, let’s just step back for a second and take stock of everything that’s happened in the past 72 hours.

  1. Gary Cohn resigned in disgust over Trump’s decision to start a trade war;
  2. That same decision prompted Europe to threaten retaliatory measures on bourbon, peanut butter, cranberries and orange juice;
  3. Trump got sued by a porn star;
  4. A former Trump campaign aide went on a drunken tour of cable news networks and, in addition to lambasting pretty much everyone on the face of the planet save Roger Stone, said Robert Mueller “likely has something” on the President

And it’s just Wednesday. At some point last week (and I can’t find the post right now, but I’ll dig it up later and add the link in), I said that we seem to be back where we were late last summer in terms of Trump. That is, back in a situation where this joke is perpetually applicable: “this was the worst week for the Trump administration since last week.”

Markets were of course shaken on Tuesday evening when news of Cohn’s resignation  hit, and due to unfortunate timing, Asia was the first casualty. It was a choppy session as traders seemed to be unsure how to balance the positive news out of the Korean peninsula with the turmoil emanating from D.C. (and that says a lot – investors are now looking to Kim Jong-Un for stability amid the global chaos Trump is fostering). Ultimately, Asian stocks were lower.

 

If you had to pick two headlines from the U.S. session to file away, here are a couple of good candidates:

  • NAVARRO SAYS HE’S NOT A CANDIDATE TO REPLACE COHN
  • SANDERS: POTENTIAL TARIFF CARVEOUTS FOR MEXICO, CANADA

The former is obviously good news because the last thing anyone needs is a situation where Peter Navarro is given even more clout and the latter is positive for NAFTA negotiations and also suggests Trump may be prepared to tone this shit down a little bit (earlier in the day, Wilbur Ross tried to say the same thing Huck-San said, but ended up making things worse with an errant comment about “blowing up the world“).

Here’s how this has played out since last Thursday:

SPX

If you’re trying to figure out what to make of Wednesday, my message would be the same as it was on Tuesday: good fucking luck. Futures tell the story (to the extent there’s one to tell):

Cohn

Fourth straight day of gains for the Nasdaq:

Nasdq

10Y yields dove midday, but Treasurys ultimately came off the highs. Here’s Bloomberg summarizing: “Treasuries pared gains into the 3pm ET settlement during a choppy session, after being supported through relentless number of block trades for combined $3.5m/DV01; curve steepened, unwinding flattening move Tuesday driven by rate-lock unwinds across back end of the curve into CVS deal pricing.”

10Y

The dollar did this:

Dollar

Note this out today from Goldman:

Last week US President Trump announced tariffs on imported steel and aluminum during a White House meeting with industry executives. Despite some resistance from members of Congress and others, recent comments suggest the Administration is intent on following through, and our Washington analysts expect further disruptive trade developments over the coming months. Significant tariff hikes have been relatively rare among developed market economies during the floating exchange rate era, so we have few observations to work with. That said, past US tariff increases have coincided with broader concerns about export competitiveness, and have tended to be followed by Dollar weakness.

We got the BoC this morning and it sounded pretty dovish to me.

So here’s the loonie which of course is hyper-sensitive right now:

USDCAD

The yen was of course bid following the Cohn news on Tuesday evening but by the time it was all said and done, USDJPY had trimmed its losses:

USDJPY

Oil tumbled the most in three weeks today on a combination of factors, but it looks like the production number from the EIA report was what did it. The knee-jerk reaction around the data was characteristically manic but ultimately, oil was sharply lower.

WTI

European shares managed to rise across-the-board by the close. On the week, the DAX is up sharply, as are Italian equities (highly amusing considering the election outcome):

Europe

Finally, for your moment of zen, here is Sarah Huckabee Sanders talking about a porn star…

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