Markets:
- S&P 500 up 0.4%
- WTI crude oil down $1.88 to $70.48
- Gold down $24 to $2683
- US 10-year yields down 4 bps to 4.30%
- JPY leads, AUD lags
China set the table for US markets on Friday as the stimulus announcements disappointed, leading to a 5.5% decline in US-listed China ETFs and a slump in the Australian dollar that worsened through the day. Worries about China growth also likely weighed on oil prices and dragged yields lower on less inflationary pressure.
The long end of the yield curve has now retraced the post-election jump and that’s part of the ongoing theme in markets, something I would call “he didn’t really mean it”, in regards to tariffs, mass deportations and other inflationary policies. The market is instead focusing on an agenda that would look like Trump 1.0, whether tariffs were threatened and sometimes imposed but nothing even close to what he campaigned on. That’s understandable given that very few politicians deliver on campaign rhetoric anywhere.
The US dollar climbed (ex yen) despite the falling yields. Part of that was because the front-end moved up slightly but the euro selling was notable as it slumped to 1.0700 in US trading from 1.0775 at the start of the day, the pound also came under moderate pressure. Commodity currencies also struggled.
Overall, different markets are sorting through different themes and challenges right now. It was an historical week, so that’s understandable and it will continue next week, so rest up and have a great weekend.