Monday was predictable.
Risk assets rallied after Steve Mnuchin’s Sunday comments about “putting the trade war on hold“, although hilariously, he showed up on CNBC to “clarify” that it was never in fact a “war” but rather a mere “dispute”:
— CNBC Now (@CNBCnow) May 21, 2018
I guess that’s Steve, although given how stiff and mechanical he is on TV, one often wonders whether they’ve hired one of those Chuck E. Cheese Animatrons out of retirement and dressed it up in a suit to double for Mnuchin in interviews.
The equity rally began overnight in Hong Kong and the risk-on sentiment was alive and well in the U.K., where the FTSE hit another all-time high.
Best day for the Dow since May 4:
But things aren’t well in Italy. Market angst around the prospect of a parallel currency sent 2-year yields sharply higher and notably, the BTP-bund spread exploded wider:
Volumes picked up amid comments from Fitch which is following in the footsteps of DBRS, noting that the populist “plan” has the potential to “significantly increase” the government deficit.
Still, that was hardly enough to rattle other markets on a day when the trade “dispute” (don’t call it a “war”) was “resolved”. Havens were pressured across the board, with the yen and gold both falling, although the moves came off a bit later:
The dollar was up initially, but gave it all back as EM currencies found some respite from the risk-on sentiment:
10Y USTs chopped around, plying a narrow range – a bit of flattening in the curve. Here’s 10Y yields going back to the retail sales spike just for reference:
The Turkish lira is in a death spiral – you can read the latest on that rather unfortunate story here, but suffice to say this: new all-time lows. Big picture shows the extent of the bloodbath:
Oil was higher, coming off a third week of gains for WTI and a sixth consecutive week of gains for Brent. Venezuela’s “election” raises the prospect of further supply issues. Trump signed an executive order restricting the Maduro regime’s ability to sell assets. Specifically, it blocks all transactions related to the purchase of debt owed to Venezuela and halts some equity transactions as well.
Finally, for your moment of zen, here is Trump explaining how rednecks who are fascinated with cars going around in circles at 200mph are similarly enamored with the national anthem…
"One thing I know about NASCAR, they do indeed stand for the playing of the national anthem," President Trump says at NASCAR event at the White House. pic.twitter.com/ZfUk8i9Byx
— NBC News (@NBCNews) May 21, 2018