Well, looking out across markets on Tuesday things have got that “we just dodged a bullet” feel to them.
The dollar looks to be consolidating a bit, 10Y yields have an up-ish feel to them, and hey, at least the yen’s not staging a furious rally. Or, visually:
That’s right! “We’ve come too far, there’s too much to lose!”
Which is why you should be happy to see this on a Tuesday morning:
When you pan out, you can see why we’ll take whatever we can get:
That’s your reflation narrative right there and what you see is it dying. Dollar under (lots) of pressure, erasing post-election gains and Treasurys bid heavily taking yields dangerously close to 2.37 below which God only knows what happens as whatever’s left of the 10Y short after last week’s “pruning” gets covered.
“The greenback consolidated on Tuesday as dollar bears adopted a more subtle approach after Monday’s reversal in Trump-reflation trades,” Bloomberg wrote this morning, adding that “investors with short dollar positions across the board took profit after the London open, after dollar-yen closed on Monday above 110.63, the low of the previous two days.” Fast money accounts initiated fresh longs, European FX traders said.
Bloomberg’s ‘most read’ news story overnight was entitled “equities rebound as worries ease, dollar steadies”. That sets the tone for today. Bond and FX market participants’ reaction to the failure of the healthcare bill has been to re-price Treasuries and the Dollar under the assumption that President Trump has lost a little of his shine. Equity market participants have taken a look at the lower yields and weaker dollar and decided that since absurdly low rates are the elixir that the equity bull market lives on, they might as ‘buy the dip’ yet again. And that kind of attitude is going to have the FX market off in search of high-yielding currencies in the blink of an eye.
Sound familiar? Here’s what we wrote earlier:
Monday was interesting not necessarily for how we closed but rather for how we opened. FX and rates told the story, equities followed but as usual, BTFD reasserted itself even though we still closed red. And as Breslow notes in Tuesday’s missive, there’s still a “the sky is falling” feel to things every time SPX is red.
In any event, Asian stocks are higher with the Nikkei buoyed by the well-behaved yen. European stocks seem quiet.
- Nikkei up 1.1% to 19,202.87
- Topix up 1.3% to 1,544.83
- Hang Seng Index up 0.6% to 24,345.87
- Shanghai Composite down 0.4% to 3,252.95
- Sensex up 0.6% to 29,399.95
- Australia S&P/ASX 200 up 1.3% to 5,821.23
- Kospi up 0.4% to 2,163.31
- FTSE 7293.48 -0.02 0%
- DAX 12066.92 70.85 0.59%
- CAC 5018.23 0.80 0.02%
- IBEX 35 10339.00 36.10 0.35%
We’ll get Yellen today after lunch on the East coast and that’s not all in terms of Fedspeak:
- 12:45pm: Fed’s George Speaks in Midwest City, OK
- 12:50pm: Fed Chair Janet Yellen Speaks
- 1pm: Fed’s Kaplan Speaks in Dallas
- 4:30pm: Fed Governor Jerome Powell Speaks
And you know, what else can we tell you this morning that you’ll be interested in? Probably not much. So just make like Frank The Tank (shown above) and try to keep your goddamn composure.Subscribe to NFTRH Premium for your 50-70 page weekly report (don't worry, lots of graphical content!), interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter @BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).