Nasty Places.

This was a week defined by incoherent ramblings from a septuagenarian, who kicked things off on Monday by trying to tie the fate of NAFTA to the number of migrant caravans en route to U.S., kicked the absurdity up a notch on Tuesday by brushing imaginary dandruff off the shoulder of an incredulous Emmanuel Macron, bragged to the world on Wednesday about how proud he is to be “dragon energy brothers” with Kanye West, dialed into Fox & Friends on Thursday to deliver one of the most unhinged “interviews” in the history of American media on the way to inadvertently making his legal problems worse, and then on Friday held a predictably uncomfortable press conference with Angel Merkel who “doesn’t know anything about” how much of “nasty, mean place” America’s capital really is:


There you go. And speaking of “nasty places”, North Korea is apparently set to be less of one, after a truly historic peace accord with the South was struck on Friday, setting the stage for a Trump-Kim summit that is sure to be once of most insane spectacles in world history. But hey, just because Trump is involved, one shouldn’t downplay the fact that peace is peace and if the following stunning visuals do indeed mark a turning point that will bring some measure of economic relief to the people of the North, well then that’s fantastic:


We just have one question:

Analysts are lukewarm on the prospects for the won in the context of the diplomatic breakthrough, with most folks suggesting that KRW will continue to be driven primarily by the dollar and the rise in Treasury yields which, as we noted earlier this week, is starting to put a real dent in the carry trade.

“The Korean peace agreement may provide only a limited boost to the South Korean won as the economic benefits are unlikely to be realized immediately,” Mizuho’s Vishnu Varathan wrote on Friday, adding that “markets also had previously preferred to react to the North Korean threats via the options and derivative markets which are more cost-effective for hedging; hence, the impact on the spot from the peace deal will be limited.”

For what it’s worth, remember that equities are very cheap in the South:


Keeping with the “nasty places” theme, this guy is in one:


That’s Oleg Deripaska and he’s down something like $4 billion personally in the wake of U.S. sanctions that have dented the ruble and other Russian assets this month. On Friday, EN+ (which owns 48% of Rusal) said Deripaska has agreed cut his stake in the company to below 50% and has acquiesced to a proposal that calls for his resignation from the board. That gave the ruble a brief lift and helped underpin the flagging currency which also got a boost on Friday when the CBR suggested that thanks to recent FX weakness, the scope for further rate cuts is now limited. It’s been a rough month:


For comparison purposes:


The Russia ETF was whipsawed on Friday amid the news:


The GDP beat and accompanying strong wage data in the U.S. point to a higher likelihood of the Fed squeezing in a total of four hikes this year (more on that here). Treasurys bull flattened on Friday, with an initial selloff on the econ fading later in the session. As Bloomberg notes, “most of the flattening occurred as yields initially rose in minutes after the U.S. economic data releases, which bolstered expectations for at least two more Fed rate increases this year.” Here’s what the 5s30s did immediately after GDP and ECI beat:


You can see 10Y yields falling from the post-data peaks as the day wore on and ultimately, we’re now ~4bp below the dreaded 3% level, which we hit this week for the first time in four years to an absurd amount of fanfare.




This was the best week for the dollar in 17 months as expectations for Fed hikes and rising rates continue to buoy the previously beleaguered greenback on the way to squeezing the shorts:


U.S. stocks snapped a two-week win streak – basically this week was a lot of work for nothing:


Despite the strong dollar, crude is hanging out near three-year highs as everyone seems pretty convinced that Trump is going to rattle markets on May 12 by renewing sanctions on Iran:


Oh, speaking of oil, Exxon had its worst day since Vol-pocalypse on Friday as investors jeered a profit and production miss:


The pound dove on Friday sinking to its lowest level since March 1 as growth seemingly flatlined, leading to a sharp repricing of May BoE odds:


Finally, for your moment of zen, here is Trump trying and failing to get a smile out of Angela:


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