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Moment Of (No) Clarity.

Aaaand that's the week.

I guess this goes without saying, but this week didn’t offer much in the way of clarity on either domestic or international politics.

Stateside, the immigration debate is a train wreck and it’s hard to imagine the GOP won’t end up suffering in the midterms from the family separation issue. That’s not to say it will be the deciding factor, but even if this gets resolved quickly, this won’t be water under the bridge by November. Even if you agree 100% with the administration’s hardline stance on border control, it would be nearly impossible to argue that the PR effort wasn’t bungled. Between Jeff Sessions and Huckabee Sanders citing Bible verses, Corey Lewandowski’s “womp, womp” debacle, Kirstjen Nielsen refusing to even pretend like she cares and Melania wearing a coat that actually said the words “I really don’t care”on the back of it, they couldn’t have handled this situation any worse if they tried. It was a series of headlines straight out of The Onion, only, as usual, the stories were real. Satire and irony are indeed dead in the Trump era.

On the trade front, things weren’t any better. Consider the following excerpt from Goldman as you ponder how out of hand this has gotten:

The White House also announced on June 18 that it would impose 10% tariffs on an additional $400 billion of products from China if intellectual property policies and related issues are not addressed or if China retaliates. This would potentially involve tariffs on two successive rounds of $200 billion each. We note that since President Trump had previously proposed a 25% tariff on a second round of $100bn in imports from China, this latest proposal amounts to a net $300bn increase in products affected. As shown in Exhibit 1, if implemented this would raise the total amount of tariffs the Trump administration has proposed from around $500bn to nearly $800bn, or about 4 times the cumulative amount that had been proposed as of a month ago, before President Trump proposed tariffs on global auto imports on national security grounds. Still, at this point, the amount of US imports subject to implemented tariffs is very low compared to what has been proposed, even if the first round with China takes effect on July 6.

Tariffs

As Goldman notes in the last sentence there, there’s still time to avert a disaster, but that stair-step chart is almost unconscionable in terms of how dramatically Trump has escalated the threats in the short space of just six months. Even if the red shaded area never rises, the sheer blatant recklessness inherent in the gray shaded area underscores the contention that Trump lives in a cartoon world and is entirely bereft of anything that even approximates perspective when it comes to evaluating the feasibility of his policy positions.

Friday brought no relief on this. Just a day after the European auto sector tanked on the heels of Daimler’s guidance cut, Trump was “at it again” (to employ his own vernacular), reiterating his threat to levy punishing tariffs on car imports. The STOXX Europe 600 Automobiles & Parts Index is sitting at its lowest levels since September and this was the worst week since January of 2016. Volume on Friday was 157% of its 30-day average.

StoxxAutos

Daimler was down nearly 8% on the week for its worst weekly loss in more than two years. It’s now sitting at a 23-month low:

Daimler

More broadly, European shares did manage to rise on Friday, but this was still a bad week. The Stoxx 600 has fallen in four of the last five weeks, with the only reprieve coming last week (read: from Draghi):

Stoxx600

Italian shares fell for the sixth week in seven, and that fucker Salvini was on the tape again Friday talking about “whether a united Europe [will] still exist or not,” by the end of the year. That comes amid a barrage of inflammatory rhetoric on immigration. The FTSE Italia All-Share Banks Sector Index did manage to gain for a second consecutive week, so that’s good news. Obviously, there’s still a long way to go to make up for recent losses:

ItalyBanks

It’s “America first” versus the rest of the world:

RussellWorld

The S&P put the brakes on after rising in four of the last five weeks:

SPX

The Dow snapped its eight-session losing streak to close the week, so that’s good.

Crude soared on Friday after the OPEC deal tipped a supply increase that was less dramatic than the higher-end estimates. Good week:

WTI

That catalyzed the best day for energy shares in nearly a month:

XLE

In credit, compare and contrast:

Credit

EM is obviously still a hot topic. And money is coming out. Here’s BofAML recapping:

EPFR fund flows down: EM debt 9th consec wk down

  • EXD, LDM, blended funds and EM Equity were all down.
  • 9 negative weeks in a row for overall EM debt, outpacing the large negative trend recorded at the end of 2016 (6 consecutive weeks down) but still not as bad as the one registered since Oct 15 – Feb 16 (18 consecutive weeks down).
  • EPFR aggregate EM debt flows were down -0.4% total. -0.5% for Local Debt (LDM), -0.3% for External Debt (EXD), -0.3% blended funds and -0.4% EM equity.
  • ETF flows were down in LDM but positive in EXD (-0.6% and +1.5%

Flows

It is not looking good for Chinese equities. The SHCOMP closed below 3,000 for the first time since September 2016 this week amid the trade tensions. This was the fifth weekly decline in a row and the worst week since Vol-pocalypse:

SCHOMP

And finally, for your moment of zen….

 

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2 comments on “Moment Of (No) Clarity.

  1. Up is Down

    Quite the revealing comment by Brian Chlamydia.

  2. Trump’s treatment to immigrant kids is similar to his love for kids from Puerto Rico – who are US citizens, just brown ones.

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