As you’ve probably noticed (assuming you’re tuned in for Christmas Eve trading), something “snapped” again for U.S. equity futures just after 7 AM in New York.
For years, critics of modern market structure have bemoaned how “frequent” these mini-“flash” events (seemingly catalyzed/facilitated by liquidity vacuums) have become, but by “frequent”, they didn’t mean every other day. Here’s a fun trip down memory lane:
Lately, it seems like the bottom falls out at least once every 48 hours. Recent examples include i) the crash that accompanied the reopen following the national day of mourning for President Bush, ii) last Monday’s downdraft following Jeff Gundlach’s bombastic doomsday prophecies and iii) multiple lunchtime swoons including the infamous December 4 midday massacre.
Monday morning’s sudden drawdown came after a reasonably calm overnight session. Fast forward two hours and it still hadn’t “corrected” itself. This probably isn’t what Steve Mnuchin was hoping for:
The move was of course mirrored in Treasurys, as 30-year yields fell below 3%.
Meanwhile, USDJPY (already under pressure as the yen is riding a seven-day rally amid broad-based risk-off sentiment and now, downward pressure on the dollar thanks to bickering inside the Beltway and the prospect of Donald Trump moving against Jerome Powell) is still moving lower after falling sharply on the initial downdraft in equity futs.
Again, this is made even more amusing by the fact that it comes just as Steve Mnuchin is doing his damndest to facilitate a panic by convening an emergency meeting to discuss market stability despite the absence of an actual emergency.
Generally speaking, all of the above is probably just more evidence to support the contention that a lack of market depth is serving to exaggerate downside moves. Over the weekend, we brought you a series of visuals from CME which poignantly illustrate the trend in liquidity and you can be absolutely sure that things are far worse this week given the holidays.
Here’s hoping Mnuchin eschews any further tweeting on Monday, although now that he’s tipped his intention to convene a meeting with the vaunted “plunge protection team”, I suppose it will be necessary to put out another press release that details what was discussed.
Hopefully, Mnuchin won’t turn into his boss when it comes to embracing Twitter as the preferred communication tool when it comes to disseminating policy announcements.