Holiday Psych Out: Market Nerves Frayed After Mnuchin Plunge Protection S.O.S.

Steve Mnuchin’s best efforts to engineer a panic by tweeting out an emergency bulletin on Sunday evening weren’t entirely for nought. There’s a palpable sense of angst in the crisp, holiday air on Monday and Steve’s ridiculous S.O.S. to Wall Street is undoubtedly contributing.

That said, global markets were reasonably steady in thin trading to start the week as investors attempt to make sense of the circus playing out inside the Beltway, where Donald Trump has decided to hold the government hostage in lieu of $5 billion in funding for his “steel slat” Mexican-be-gone barrier.

Read more

Why Is Steve Mnuchin Calling Wall Street CEOs On Sunday To Ensure ‘Ample Liquidity’?

“We do not expect the partial shutdown to have substantial effects on financial markets [as] it’s unrelated to the debt limit and has no implications for Treasury financing”, Goldman writes, before cautioning that “the confusion and disorder surrounding this week’s spending debate suggest fiscal deadlines in 2019—including the debt limit deadline, which we expect to fall between August to October—could be more disruptive than they have been since the 2011-2013 period.”

Obviously, all of this is weighing on the dollar, which kicked off the week on the back foot. The yen is stronger for a seventh consecutive session.

(Bloomberg)

That obviously doesn’t help Japanese equities, nor does it do much for the BoJ, which could do without yen strength as Kuroda desperately looks for footholds in his long climb out of the accommodation rabbit hole. The Topix is now mired in a bear market.

(Bloomberg)

European equities are looking shaky – again. The Stoxx 600 is now sitting at its lowest levels in more than two years and, more broadly, the MSCI World is at a 21-month nadir.

(Bloomberg)

Oh, and U.S. small caps are once again on the verge of erasing their post-election outperformance versus global equities, a testament to the notion that one of the purest “America first” trades is dead.

(Bloomberg)

China announced more tariff cuts overnight, but, as was the case with Friday’s news that Beijing is angling to implement additional tax breaks and step up monetary stimulus, these headlines seem to have lost their ability to excite market participants.

But hey, thanks to Steve Mnuchin, at least we know that the ATMs aren’t going to go dark over the holiday.