- Ugly week for equities
- Russell 2000 led the U.S. indices down, falling over 5 percent
- Shanghai down over 7 percent, some of which was catch up after a week close
- The 10-year yield rise, which triggered the equity correction, stabilized peaking at 3.25 percent
- U.S. credit starting to crack with lower tier spreads blowing out. As we said last week, watch this space!
- EM FX a bit stronger led by Turkey with release of America pastor
- Crude oil gave 4 percent back
- Lumber = Timber! Now down almost 50 percent from its spring peak
Commentary: Equities cracked as bonds cracked. Watch the levels in following table on the S&P500. Closes below the key .50 Fibo at 2736 and then 2688 makes it a high probability we see the February low. Much will depend on the U.S. bond market. Tuesday’s release of the TIC data, measuring foreign flows into the U.S. Treasury market are now exceptionally important to the stability of interest rates.
Angels Merkel’s coalition party took a beating in the Bavarian elections calling into question the stability of the German coalition government. Unclear of impact on euro, but we bet it’s not a positive. All eyes on Frankfurt elections in two weeks. Looking for bounces to get shorty.
Watch Europe on back of Merkel’s trouncing in the Bavarian elections
Economic gains continue to accrue to capital over labor