The Daily Shot 9.12.16

By SoberLook

Greetings,

Let’s begin with Friday’s markets where the volatility has finally returned. A confluence of events including the ECB’s inaction, some of the Fed officials’ hawkish comments, Jeffrey Gundlach turning bearish on bonds and technical factors sent markets into a sharp correction. Machine-driven activity accelerated the selloff. The equity markets were particularly spooked by the sharp correction in global bonds.

1. The Treasury curve steepened as longer-dated yields jumped.

2. The situation was even more severe for Europe. French and Italian 30y government bond yields are shown below.

 

3. Bunds had a rough couple of days following the ECB’s decision to stay pat.

 

Source: McElligott (RBC)

4. Similar to the moves in the Eurozone, the 30yr gilts yield was up 12.5bp (3.6% drop in price).

1. In the equity markets, the S&P500 futures closed 2.6% lower on the day. Some had been pointing to the “triple top” technical formation.

The  selloff continues in the early Monday morning hours.

Source: barchart.com

2. Citi has recently pointed out that global equity markets are increasingly macro-driven, and Friday’s events made that quite clear.

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