The headline hockey around the G20 has reached epic levels of schizophrenia.
Tuesday’s bombshell came from WirtschaftsWoche, who suggests Trump has the Commerce Department’s report on auto tariffs literally sitting on his desk, which means he’s probably just itching to slap duties on cars.
Here’s the actual language from the WirtschaftsWoche story:
US President Donald Trump may impose tariffs on imported cars as early as next week. “The investigation report of the Ministry of Commerce is on the table of the President,” reported the WirtschaftsWoche, citing EU circles. “Trump will probably decide the tariffs next week after the G20 meeting in Buenos Aires.”
The dispute over possible US tariffs on cars from the EU is not over. The Europeans have already prepared a list of retaliatory measures. The report recommends 25 percent duty on car imports from all countries except Canada and Mexico. There will be no exceptions for certain car types. “The report recommends as broad a policy as possible.”
That complicates things even further ahead of the binary G20. The timing is obviously terrible coming as it does less than 24 hours after the publication of a Wall Street Journal interview in which Trump doubled, tripled and quadrupled down on the bombast on the way to making it clear that the chances of him not raising the tariff rate at the turn of the year on the $200 billion in Chinese goods that were taxed from September 24 are basically zero.
One person who thinks this is all insane is Charlie McElligott who was out on Tuesday with a highly amusing take that finds the Nomura derivatives strategist trying to make sense of the news flow.
“An absurd re-tread headline out of China’s foreign ministry spokesman stokes market confusion overnight and gives us a sneak preview of what’s to come, spurring a 25-handle Spooz rally before being clarified ~10 minutes later and reversing entirely”, McElligott marvels, before documenting the following ridiculous series of events:
Try this “fake” headline wack-a-mole on for size: *TRUMP, XI AGREED TO REACH MUTUALLY BENEFICIAL AGREEMENTS: GENG hits the tape at 02:29:36am EST…….before a delayed clarification at 02:40:55 stating *CHINA’S GENG REFERS TO NOV. 1 TRUMP-XI PHONE CALL…ooooops!
Charlie concludes as follows: “Yeah…this is gonna be a binary nightmare to trade.”
It sure is, Charlie. It sure is.
McElligott goes on to offer something in the way of confirmation for his Monday comments regarding systematic re-risking being at least partially responsible for the fleeting bounce. Here’s a rundown:
S&P (to 73% long from 34%), Russell (to -61% short from -100%), Eurostoxx (to -61% short from -100%), DAX (to -61% short from -100%), FTSE (to 73% long from -100% short), CAC (to -61% short from -100%) and KOSPI (to -61% short from -100%) all were bot / covered in our CTA Trend model.
He also reiterates his warning that the buy/sell levels for the trend followers are tightly clustered, which means it doesn’t take much one way or another to trigger re-risking/de-risking. Specifically, here are the levels to watch:
- SPX, +73% long, buying over 2742.44 +100% (+17.6bil), selling under 2639.5 +34.3% (-25.6bil), flip to max short under 2635.96 (-88bil)
- Russell, -61.1% short, selling and max short under 1477.09 (-17.4bil), buying over 1515 to get to +73.2% (+60.2bil), more buying over 1646 to be max long
- NDX, +34.3% long, selling and max short under 6289.82 (-27.4 bil), buying over 6716.85 to get to 73.2% (+8bil) and max over 7117.88 (+5.4bil)
- Eurostoxx, -61% short, max short under 3144.38 (-17.6bil), buying over 3412.41 to get to -34% (+12.2bil) and flip to long over 3416.48 (+61bil)
- Nikkei -61% short, flipping back and forth max short under 21,044.43 (-13.6bil), buying over 22,066.80 to get +73.2% (+47bil) and max over 22,149.29 (+9.4bil)
- HSCEI -61% short, max short under 9,953.7 (-2.8bil), buying over 10,785.88 to get to 73% long (+9.6bil), and max long over 11,798.33 (+1.8bil)
- US 10yr bonds -53.7% short, selling under 118.9531 -75.3% and max short under 118.5056, buying over 119.400 (+41.4bil) and max long over 123.26
- EUR 10 yr. bonds +100% long, selling under 160.3513 +56.8% (-34.2bil), more selling under 158.36 to get short -62.5% and more selling under 158.3461 to get max short
- JPY 10yr bonds +100% long, selling under 150.7895 to get to +53.7%, more selling under 150.3188 +16.2%, flip to short and max under 150.2988
- GBP10yr bonds, +100% long, selling under 122.8788 to get to 56.8% long, more selling under 121.9729 +19.3% flip to short and max under 121.5478
- EURUSD, -100% short, buying over 1.123.93 -84%, more buying 1.1726 -29.9%, flip to long over 1.1826 to be max long
- USDJPY, +84.1% long, max over 113.8354 (+7bil), selling under 110.64 (-23.6bil) and max short under 108.2942
- GBPUSD, -100% short, buying over 1.3045 to get to -29.9% short, flipping to max long over 1.3405
- USDCNH, +81.5% long, max long over 6.9568 (+3.2bil), selling under 6.8626 +29.9% (-11bil), flip to max short under 6.4455
- WTI -100% short, buying over 53 to get to -16.9% (+8.2bil), flip to long and max long over 66.2050 (+11.2bil)
- Gold, +15.2% long, selling and max short under 1203.72 (-8.8bil), buying over 1271.58 (+6.4bil) and ma over 1303.85
- Copper +15.2% long, selling and max short under 6053.39 (-3.6bil), buying over 6572.23 (+2.6bil) and max long over 6904.48
Basically, if you can’t point to a fundamental reason for a move that plays out around any of those levels, you might point to momentum chasers.
And then there’s more from Charlie on gamma effects, which he “credits” with contributing to Monday’s “relentless bid.”
Good luck figuring out how to position for the G20. At this point, it’s a complete crapshoot and we’re pretty sure Trump wouldn’t have it any other way.