Pick A Fire, Any Fire!

Trade tensions took a back seat which is a testament to how batshit crazy this administration truly is — I mean imagine what kind of dumpster fire would have to be raging at 1600 Penn to relegate “global trade war” to the backburner of the news cycle.

That’s from our weekly wrap published as usual on Friday afternoon and the point is that between Trump’s efforts to boost the ratings on his Syria strikes by previewing them on Twitter and the administration’s painful attempt to deflect from the Michael Cohen debacle and from James Comey’s admittedly self-serving but nevertheless devastating account of his interactions with the President, the fact that the future of global trade and commerce is up in the air has somehow managed to slip everyone’s mind.

To be sure, Xi’s assurances at his keynote address at the Boao Forum in Asia on Tuesday helped to calm everyone down on the trade front. It wasn’t really the substance of what he said that mattered (China has made pretty much all of those promises before). Rather, it was the way in which he delivered the speech that inspired confidence. His message was hopeful but his tone was unwavering. It came across less as a message about trade and more as a message about how, although he’s an autocrat presiding over a kind of soft-totalitarian state, he’s not going to let Donald Trump blow up the fucking world, so we can all stop worrying about armageddon because Beijing’s not going to let it happen. That kind of tacit “I’m not going to let this whole thing go to hell in a handbasket” message used to be the purview of Angela Merkel, but bless her heart she’s just exhausted at this juncture.

But there’s plenty of room between now and where we’d have to get to before Xi imposes global martial law to keep the planet from breaking apart at the core for the unscrupulous (e.g. Putin), the criminally insane (e.g. Erdogan), and the accidental autocrats with early stage dementia (Trump) to drive up volatility across markets by triggering (more) geopolitical land mines. Again, if we learned anything from last week it’s that Trump is like a cook standing in front of a stove with a flaming skillet on each of four burners and only one lid.

Here’s Bloomberg describing the situation in a Friday piece on the reemergence of “weekend risk”:

James Comey. Robert Mueller. Michael Cohen. Rod Rosenstein. These are names you’re probably hoping not to hear if you’re holding stocks heading into the weekend.

Headline risk is high. There’s China trade tensions and war in the Middle East. Still, the S&P is poised to end the week up 2 percent. Things have been a little easier for investors — but for how long?

Former FBI director Comey is set to make multiple media appearances before the formal release of his book next week. Speculation over the future of Deputy Attorney General Rosenstein has picked up as the Mueller probe continues. Cohen, President Donald Trump’s personal attorney, remains in the spotlight after the FBI raided his office and home.

Which one of these fires will be on the front burner this week and which will be temporarily snuffed out or otherwise overshadowed by the others remains to be seen, but as Barclays reminds you over the weekend, all of this is playing out against a backdrop where volatility has reset higher (although that has for now been mostly confined to equities) and where the econ seems to be rolling over.

“Global risk sentiment has become more fragile after the US equity meltdown in February and the escalation in Sino-US trade conflicts, and could easily be derailed if financial contagion from Russia and the Middle East spreads,” the bank writes, referencing the meltdown in Russian assets that played out last week and the escalation in the Syria conflict.

“The VIX, currently at about 18, although lower than the extreme levels in February, remains higher than the average level of 11 in 2017,” the bank continues, adding that “the spread in financial contagion would be happening at time when global economic data trends and surprises are weakening.”