It was somewhat remarkable that U.S. equities held up as well as they did on Thursday afternoon amid the turmoil in the Brazilian real and the concurrent safe haven bid that sent Treasury yields tumbling and 10Y futures volume surging.
It looks like that relative resiliency is going to be tested on Friday, coming off a lackluster Asian session that saw equities hit pretty much across the board. In a testament to how all it takes is one headline to start tipping dominos in an increasingly interconnected market, a report from Nikkei about Apple which hit at roughly 4:00 a.m. in the U.S. dented futures and looks to have catalyzed another bid for Treasurys.
Specifically, Apple is said to have informed its supply chain to get ready for around 20% fewer components for iPhones hitting the market in the latter half of 2018, versus last year’s orders. Apple, Nikkei said, is being “quite conservative” with new order placements.
You can see when that hit in futures:
“So goes Apple”…
Well have a look at what happened around the same time (panned out to capture Thursday’s action for context):
As Bloomberg notes, there was a big block trade in there with 24,116 TYU8 futures blocked 119-27+ ($1.8m/dv01; $2.1b of current 10-year bonds). That was at 4:18 New York time. This looks like it affected bond markets more broadly:
That’s helping to push back against some of the upward pressure on core yields from recent news about the ECB’s plans to talk APP unwind at the June meeting.
Meanwhile, EM FX continues to look extremely shaky. Today it’s the rand, and losses there accelerated around the same time all of the above was unfolding:
You get the idea. The mood is sour and Donald Trump of course isn’t helping by unleashing tweet after tweet after tweet criticizing U.S. allies ahead of a trip to the G-7 meeting in Canada, a trip he will now cut short in the interest of having more time in Singapore to prepare to meet with new bestie Kim Jong-Un.