U.S. equity markets were bleeding badly just an hour into the cash session following another mini-“flash” event in futures that rippled across markets, catalyzing risk-off moves in Treasurys and USDJPY.
As of 10:00, all sectors were red. Hilariously, financials were down 1.5%, stone cold proof that Steve Mnuchin’s call to bank CEOs about liquidity had exactly the opposite of the intended effect.
Speaking of that call, Treasury appears to be coming around to the fact that Mnuchin’s press release spooked markets and is attempting to clean up the mess or, more to the point, attempting to explain why Steve yelled “fire” in a crowded theatre.
CNBC is out reporting that according to officials, Mnuchin viewed the Sunday emergency calls as a “prudent, preemptive measure”.
Again, there was nothing to “preempt” – there were no signs whatsoever that banks were liquidity constrained to an extent where consumer and business lending would be hampered.
Privately, officials told CNBC that reports of Trump’s dissatisfaction with Jerome Powell were another reason for the call. That suggests banks might have asked Mnuchin how close we are to a scenario where the President goes after the Fed.
In any event, Twitter was apparently correct to mercilessly lampoon Mnuchin for his Sunday evening “don’t panic” tweet, because he has surely catalyzed a panic. Stocks are in free fall.
As you can see, we are not all that far from erasing the entirety of the post election gains.
Bottom line: This administration is a comedy of errors.