‘Lost In Translation’ Trade-Talk Sparks Stock Surge, Bond Bloodbath, Precious Metals Pounding

A mis-translated story from China overnight on removing tariffs sparked a melt-up in stocks, bond yields, oil, and the dollar today (and slammed precious metals).

When i translate the Chinese statement that moved the market last night it doesn’t seem like there is anything new? pic.twitter.com/yKUXCyBJMq

— FxMacro (@fxmacro) November 7, 2019

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As @simonting says, its lousy trade news masquerading as good news.

[youtube https://www.youtube.com/watch?v=ilcRS5eUpwk]

But that never stopped the markets… which have now extended the recent panic-buying to “extreme greed” territory…

Source: CNN

Chinese stocks rallied notably in the early session with tech/small caps leading…

Source: Bloomberg

European stocks had another big day…

Source: Bloomberg

US (cash) markets gapped open and then drifted all day with Small Caps barely holding on to gains…

Futures show the moves best…

• 0220ET *CHINA, U.S. AGREED TO LIFT TARIFFS IN PHASES AS DEAL PROGRESSES

• 0520ET *CHINA STUDYING REMOVAL OF CURBS ON U.S. POULTRY IMPORTS: XINHUA

• 1200ET *U.S. SAYS 1ST CHINA TRADE DEAL WOULD INCLUDE TARIFF ROLLBACK

• 1420ET *US, CHINA WANT PHASE ONE DEAL ON PAPER BY END OF NEXT WEEK: FOX

• 1445ET *NO U.S. DECISION ON CHINA TARIFF ROLLBACK MADE, REUTERS SAYS

• 1535ET *THERE’LL BE TARIFF CONCESSIONS IF THERE’S PHASE 1 DEAL: KUDLOW

All thanks to an initial short-squeeze, which, however, gave it all back by the close as it appears the ammo for these pushes is running dry…

Source: Bloomberg

 

 

Source: Bloomberg

 

Source: Bloomberg

US Homebuilder stocks tumbled as rates soared…

Some context for just WTF is happening in the stock market, the following massive stocks are up stunning YTD…

• AMZN +19.6%

• GOOG +24.8

• MSFT +41.8%

• AAPL +63.1%

That is a $450 billion addition to market cap for AAPL…

Source: Bloomberg

Also, Apple is the largest contributor to the Dow’s 4,165 point YTD advance, adding 908 points to the Average this year (22% of total gains).

 

 

Source: Bloomberg

 

 

Source: Bloomberg

 

Source: Bloomberg

It was a bloodbath in bonds today as Treasury yields exploded higher…

Source: Bloomberg

Yields broke mid-September highs, breaking back to their highest since Aug 1st…

Source: Bloomberg

Intraday, yields legged higher on the first China tariff headline then accelerated but reversed on the auction…

Source: Bloomberg

Notably, the yield curve (3m10Y) soared to its steepest since 2018…

Source: Bloomberg

But bear in mind that the un-inversion of the yield curve is the typical pattern ahead of a recession…

Source: Bloomberg

The odds of a Dec rate-cut have evaporated…

Source: Bloomberg

And the market is now pricing less than one rate-cut by the end of 2020…

Source: Bloomberg

The Dollar ended higher with the same buying pattern appearing as the last few days…

Source: Bloomberg

Notably the dollar rally stalled at the highs from FOMC day…

Source: Bloomberg

Yuan ended higher on the day but was pushed around by trade headlines like US stocks…

Source: Bloomberg

Cryptos were all down on the day…

Source: Bloomberg

Trade deal optimism sparked the ubiquitous dump PMs, pump crude/copper trade…

Source: Bloomberg

WTI surged intraday on the trade deal headlines (but faded late on after the US headlines)…

Gold was monkeyhammered to 3-month lows… before rebounding

Silver was clubbed like a baby seal…

 

Finally, will gold catch down to global negative yielding debt volumes or are rates set to tumble once again?

Source: Bloomberg

And if the trade deal is so close… why does the market keep backing away from the surges in the odds of a deal?

Source: Bloomberg

And just a gentle reminder, the last two times that yields rose this aggressively did not end well for stocks. As Bloomberg details, the five-week change in the 10-year yield is now 40 bps…

Source: Bloomberg

…and the last two times we reached that threshold were Oct. 8 and Feb. 2 of last year — both bad days for stocks.

Source: Bloomberg