Friday, July 24, 2020

Morning Note: Huge Fish to Fry

Asian equities got hammered -- China hugely -- overnight on some serous tit-for-tatting with the U.S.. Europe is as well this morning, with every bourse we track notably in the red. While U.S. equities, especially tech, are also feeling some pain at the open; Dow down 125 points, S&P 500 down .8%, Nasdaq down 1.9% and the Russell 2000 off .13%.

The VIX (SP500 volatility) is up a whopping 8%, to 28.1. VXN (Nasdaq volatility) is up virtually the same, at 35.

Oil's up .2%, gold's up $13, silver's up .4%, copper's down 1.4% and the ag complex is mostly higher as I type.

The 10-year treasury yield is, interestingly, slightly up on the morning (price down).

Our core portfolio has been trending nicely of late, relative to the equity markets, with this morning (the day's still very young, mind you) being no exception. Amid the reporting above it's nevertheless up 0.1% this morning. Nicely in the green are our positions (in order) in Verizon, silver, the yen, energy, gold, utilities, financials, staples, industrials and ag commodities. The remainder firmly (save for materials "barely") in the red, with tech tanking 2.24%.

As I've stressed herein of late, the latest row with China would've utterly devastated global equity markets as recently as a year ago. The fact that traders have -- until today perhaps -- been distracted by other factors doesn't diminish the fact that the world's two largest economies at odds with one another poses very serious risk to global financial markets. Frankly, given China's foray -- in terms of their methods -- onto the global scene makes ongoing conflict virtually unavoidable.

One potential saving grace with regard to the US/China situation is the, thus far, fact that Chinese officialdom continue to send signals that they'd prefer to get along. Clearly, they're as beholden to their financial markets as the U.S. powers-that-be seem to be to their own. On the other hand, China's state media doesn't seem to be pulling any punches.

Here's an example of the former:

And two examples of the latter:

Those last two would've seen Chinese exporters tariffed out of existence two years ago. The fact that Kudlow is literally still talking trade deal speaks to market sensitivity. The U.S.'s position seems to be that as long as we don't hit trade, the market will hold up. The signals from China support that notion for now. Thing is, of course, the fish we've to fry these days are far too big to be landed by any degree of friendliness between Presidents Trump and Xi.

Next up we'll be performing our weekly macro analysis and reporting our findings herein either later today or over the weekend.

Have a great day!

No comments:

Post a Comment