Category: zerohedge

Blain’s Morning Porridge submitted by Bill Blain

“I give myself very good advice, but I very seldom follow it..”

As we approach the end of November and the start of the serious party season, 2019 Market Guesses are hitting inboxes across the financial world. Some of them might even merit being opened and read!

Although we’ve now seen something of a recovery from last week’s lows – stocks are higher, and even GE bonds have gained a few points, the underlying mood remains negative. Speaking to clients y’day… more than a few can’t see the point in opening the investment banks’ glossy outlooks. Everything is so absolutely miserable.. there is nothing on the horizon to be cheerful about. We are all doomed… doomed… 

Yep. They might be right. There is an awful lot of distortion still to be corrected. Asset prices need a healthy dose of reality. I can understand why analysts think equity markets are doomed because buy-back programmes are drying up as rates rise. Bond markets are in tatters due to declining credit quality and rising rates. There are increasing fears about the unintended consequences of the end of the QE monetary experiment as the end of yield tourism kicks every asset class in the vulnerable box.

The party feels over.. time for the inevitable hangover… Anyone for the last few choc-ices?

Is it really that bad…? 

If I find the time I might run up a list of things we are unlikely to see next year – top of which will be a Brexit solution that pleases anyone. We’ve got 2 weeks of intense politicking to look forward to before the UK parliamentary vote around Dec 11th. That means lots of ongoing UK instability as Theresa May attempts to cobble together a majority. (I’m holding back the launch of an exciting UK property linked deal just because the mood feels so bad!)

It really isn’t helpful that Brexit continues to dominate the headlines – the rumours circling about backroom Brussels deals on ceding sovereignty of Gibraltar to Spain won’t help placate the legions of gammon.

My mole in Brussels says its actually more serious – apparently the Danes are demanding they get East Anglia, the French want the Channel Islands and have put in a claim for a large swathe of Chelsea, while the Irish will receive the North and most of the Scottish Islands.. Norway is getting Shetland and Orkney (although no one seems particularly bothered they aren’t even in the EU!) The Germans are claiming the North Sea on the basis the Shipping Forecast refers to the German Bight. The Swedes were offered York, but after thinking about it, politely declined. No one knows who gets North or South Utsire. 

On the other hand, I remain confident some kind of UK/EU solution will be found, and suddenly everyone will be happy, joyful and the UK will see a spectacular relief rally.. (what the ***k have I been smoking???) I’m frankly surprised bookies are calling the parliamentary vote at 50/50. Ms May must have an awful lot of photos of Conservative MPs in compromising situations.. Good luck to her – and, any deal is better than more Brexit. Stop talking – start doing!

I’ve been working in markets for over 30 years and its never felt more like we’re living in the times of a mad Red Queen. Donald Trump’s interview in the WSJ this morning is a must read – (there is a link to it on the website https://morningporridge.com/stuff-im-watching). Some confusion about interest rates vs tariffs, but the man lays out his economic genius clearly.. (US Readers – obvious Sarcasm Alert)

If you add a mad, bad, and dangerous to cross president to the anecdotal evidence of global slowdown – the heat coming out US and London property markets, GM shuttering US plants, and weaker than expected data across the US, China and Europe – it feels like entropy and momentum has been sucked out of activity! 

Meanwhile, the Carlos Ghosn Japan story beggars belief. I fail to see how any company exec could have ripped off his own company to such an extent unless they were utterly and equally complicit in it! It’s a coup. Over the years corporate Japan’s record against successful and reforming Occidental businessmen has been uniformly awful and utterly corrupt. The picture of a Japanese corporate shogun expressing his outrage is utterly hollow – and reflects badly on them. As I’ve asked before – would you really want to invest in companies with corporate governance standards so corrupt? 

Back to markets, and the outlook for next year is complex.  As the age of QE experimentation and distortion ends, a new age of financial reality is emerging. Its back to the old choices: markets that reflect growth, are least distorted by the unintended consequences of QE and are thus least likely to suffer from its unwind, acknowledge the reality of normalising interest rates, the risks of the new normal slow growth economy,  factor in politics and populism, and don’t neglect that volatility equals opportunity! Simples eh?

The recent declines in stock prices – most clearly the over $1 trillion decline in the FAANG tech stocks – makes the market look cosmetically cheap. But is it yet realistic? Higher interest rates (and the crisis at GE) means its far less likely we’ll see the $4 trillion wall of stock buybacks continue. A very small shift in allocations from stocks to bonds will further reduce money driving stock momentum – and that’s very possible as yield tourism diminishes.  A very interesting research note from Jeffries makes an informed estimate US investors hold around $36 trillion in stocks. A 10% shift back to higher yielding bonds will have a dramatic effect…

While the Fed may slow the pace of US interest rate hikes if clearer signals of a looming recession emerge, the likelihood remains for higher rates. With 10 year Treasuries hovering around 3% plus – more than a few accounts regard them as an attractive defensive cash proxy. 

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Moments ago, the text of Richard Clarida’s speech “Data Dependence and U.S. Monetary Policy” was released and contrary to expectations for a dovish relent, the Fed Vice Chair backed “gradual rate hikes” even as the neutral rate remains uncertain.

Predicting that the U.S. economic expansion will become the longest on record next year, Clarida said that “as the economy has moved to a neighborhood consistent with the Fed’s dual-mandate objectives, risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago.“

He then cautioned, somewhat redundantly, that “raising rates too quickly could unnecessarily shorten the economic expansion, while moving too slowly could result in rising inflation and inflation expectations down the road that could be costly to reverse, as well as potentially pose financial stability risks.”

While Clarida said the neutral rate remains unclear, he noted that the real federal funds rate is “much closer to the vicinity” of neutral than in Dec. 2015, he says, but actual level of neutral is “uncertain.”

There was a tone of caution however, when Clarida referenced high frequency economic indicators, noting that Umich inflation expectations remain at the “lower end’” of range consistent with price stability, while TIPS show expected PCE inflation somewhat less than 2%.

In what has been interpreted as a hawkish statement, Clarida referenced the key issue –  where is the neutral rate, and will the Fed surpass it as Powell suggested two months ago – and said the process of learning about the neutral rate and optimal unemployment rate “supports the case for gradual policy normalization, as it will allow the Fed to accumulate more information from the data about the ultimate destination for the policy rate and the unemployment rate at a time when inflation is close to our 2 percent objective.”

But his most hawkish comment had to do with the size of the Fed’s balance sheet, with Clarida saying he “wants to operate with the smallest balance sheet possible while still achieving objectives.”

And, as the chart below shows, which shows the actual and projected shrinkage of the Fed’s balance sheet, there is a long way to go…

Offsetting this was somewhat dovish language regarding employment dynamics, observing the continued shortfalls in labor participation among prime age women & among 25-54 year old men particularly. On that front, Clarida said he sees room for prime-age labor participation to rise, and says productivity gains are both cyclical and structural.

Looking at the economy, Clarida had one particular warning, noting that “an improvement in business investment will be important if the pickup in productivity growth that we have seen in recent quarters is to be sustained.”

The bottom line is that reading between the lines of Clarida’s “hawkishly cautious” speech, the Fed remains data dependent:

“At this stage of the interest rate cycle, I believe it will be especially important to monitor a wide range of data as we continually assess and calibrate whether the path for the policy rate is consistent with meeting our dual-mandate objectives on a sustained basis.”

In response to Clarida’s “guarded” comments, futures have barely moved, but the dollar has rebounded from session lows, and the BBDXY was back to unchanged on the session…

… while 2019 Fed Funds saw a tiny uptick, from 28.5 to 29.5 bps.

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In a trio of increasingly angry tweets this morning, President Trump raged at special counsel Robert Mueller as “a conflicted prosecutor gone rogue” lambasting him for “doing TREMENDOUS damage to our Criminal Justice System” because of his one-sided investigation.

“The Phony Witch Hunt continues, but Mueller and his gang of Angry Dems are only looking at one side, not the other. Wait until it comes out how horribly & viciously they are treating people, ruining lives for them refusing to lie. Mueller is a conflicted prosecutor gone rogue…

...The Fake News Media builds Bob Mueller up as a Saint, when in actuality he is the exact opposite. He is doing TREMENDOUS damage to our Criminal Justice System, where he is only looking at one side and not the other. Heroes will come of this, and it won’t be Mueller and his…

…terrible Gang of Angry Democrats. Look at their past, and look where they come from. “

The Phony Witch Hunt continues, but Mueller and his gang of Angry Dems are only looking at one side, not the other. Wait until it comes out how horribly & viciously they are treating people, ruining lives for them refusing to lie. Mueller is a conflicted prosecutor gone rogue….

— Donald J. Trump (@realDonaldTrump) November 27, 2018

….The Fake News Media builds Bob Mueller up as a Saint, when in actuality he is the exact opposite. He is doing TREMENDOUS damage to our Criminal Justice System, where he is only looking at one side and not the other. Heroes will come of this, and it won’t be Mueller and his…

— Donald J. Trump (@realDonaldTrump) November 27, 2018

Trump went on to reference the FBI’s shuttered investigation into Hillary Clinton’s emails, which chastised the former Democratic nominee as “extremely careless” for her use of a private email server to do official business at the State Department.

“The now $30,000,000 Witch Hunt continues and they’ve got nothing but ruined lives. Where is the Server? Let these terrible people go back to the Clinton Foundation and “Justice” Department!”

….terrible Gang of Angry Democrats. Look at their past, and look where they come from. The now $30,000,000 Witch Hunt continues and they’ve got nothing but ruined lives. Where is the Server? Let these terrible people go back to the Clinton Foundation and “Justice” Department!

— Donald J. Trump (@realDonaldTrump) November 27, 2018

Trump has attacked and criticized Mueller’s investigation into members of his campaign for months, but this outburst comes a day after Roger Stone associate Jerome Corsi refused to sign a plea deal with Mueller.

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Authored by John Rubino via DollarCollapse.com,

One of the strangest things about this strangest-ever expansion has been the way pretty much everything went up. Stocks, bonds, real estate, art, oil – some of which have historically negative correlations with others — all rose more-or-less in lock-step. And within asset classes, the big names behaved the same way, rising regardless of their relative valuation.

This seemingly indiscriminate buying created a paradise for index funds that simply accumulate representative assets in their chosen sectors. And it made life a nightmare for the higher-order strategies of hedge funds that get paid to beat the market.

The cause of all this, of course, was the tsunami of new currency being created by the world’s central banks and dumped into the banking system. It had to go somewhere and ended up going everywhere.

But now the central bank spigot is being turned off, and everything is heading back down the same way it rose – in lock-step. From today’s Wall Street Journal:

No Refuge for Investors as 2018 Rout Sends Stocks, Bonds, Oil Lower

Stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street.

By one measure, global stocks and bonds are both on track to finish the year in the red for the first time in at least a quarter-century, said Belinda Boa, head of active investments for Asia Pacific at BlackRock in Hong Kong. Major stock benchmarks in the U.S., Europe, China and South Korea have all slid 10% or more from recent highs. Crude oil’s tumble has dragged it well into bear market territory, emerging-market currencies have broadly fallen against the U.S. dollar, and bitcoin’s price—which had a meteoric rally last year—crashed below $5,000 this past week for the first time since October 2017.

Havens such as U.S. Treasury bonds and gold rallied this fall as U.S. stocks and industrial commodities staged their fourth-quarter swoon. But both are still down on a price basis for the year, reflecting solid economic growth and tighter Federal Reserve policy that have begun to push interest rates out of their post-financial crisis doldrums.

All told, 90% of the 70 asset classes tracked by Deutsche Bank are posting negative total returns in dollar terms for the year through mid-November, the highest share since 1901. (The S&P 500 is up slightly in 2018 on a total-return basis.) Last year, just 1% of asset classes delivered negative returns.

The broad pullback in markets is leaving fund managers scrambling to find places to park their money. But with global growth showing signs of slowing and monetary policy expected to tighten further, few are eager to place large wagers and risk compounding earlier failures to generate expected gains. Indeed, the simultaneous failure of so many investment strategies is being by viewed by some as a warning of what could come following years of above-average returns.

“It’s been a difficult year,” said Ed Keon, chief investment strategist at asset-management firm QMA, which continues to favor stocks over bonds. “All investors have goals, and none of those can be fulfilled with negative returns.”

Few investors believe a recession, particularly in the U.S., is imminent. Yet the strength of the U.S. economy has allowed the Federal Reserve to continue stepping further away from the regime of rock-bottom interest rates and bond-buying put in place after the financial crisis. That has, in turn, diminished the premium investors get for taking on risky assets, pressuring a variety of markets.

Hedge-fund manager Pierre Andurand, who earlier in the year bet oil could soon hit $100 a barrel, saw his $1 billion Andurand Commodities Fund suffer its largest monthly loss ever in October. Funds that had built up large stakes in fast-growing technology companies were also stung by sharp reversals. Twenty-six funds dumped their entire stakes in FacebookInc. in the third quarter, according to a Goldman Sachs Group analysis of 13F filings, including billionaire Daniel Loeb’s Third Point LLC, which offloaded 4 million shares, citing “a very disappointing quarter” for Facebook.

“It hasn’t felt like a bad year, but retrospectively, it’s been a pretty miserable year,” said Thomas Poullaouec, head of multiasset solutions for Asia Pacific at T. Rowe Price in Hong Kong. “2019 isn’t looking to be any better either.”

This shouldn’t come as a surprise, since virtually every asset class except for precious metals started the year at “priced for perfection” valuation levels that have always in the past preceded some kind of crash. It’s just more widespread and homogenous this time.

So now all the geniuses who bought the big names in random categories and made easy money are wondering why every single thing they do is suddenly wrong, while the handful of remaining short-sellers are finding that whatever they bet against goes down.

This kind of wide-spread angst ought, if history is still a useful guide, lead investors to start discriminating again, with safe havens like gold and high-grade bonds getting some of the attention that tech and cryptos have hogged recently.

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In his preview of the upcoming one-two punch of Fed Chair and Vice Chair speeches today and tomorrow, Deutsche Bank economist Matthew Luzzetti writes that around the turn of 2018 there was a tangible hawkish pivot in the Fed’s narrative. The genesis of this shift was the emergence of several tailwinds for US growth that had previously been headwinds, including domestic fiscal stimulus, accommodative financial conditions and a stronger foreign growth impulse. As a result of these developments, the central Fed narrative became that monetary policy had to be moved to at least a neutral setting and that a restrictive stance was likely to be needed at some point.

However, recent comments from Fed leadership have raised doubts about pieces of this narrative, as some of these tailwinds may be transitioning back to headwinds. So far Luzzetti writes that he has interpreted these comments as reinforcing the baseline expectation of lifting the fed funds rate to neutral before considering whether to pause, while highlighting downside risks to rate hikes beyond neutral.

This week’s Fedspeak, namely Powell, Williams and Clarida’s speeches, should help clarify whether the Fed’s narrative has reached a turning point.

With this backdrop, this week’s Fedspeak – namely Clarida’s speech on “Data dependence and US monetary policy” at 8:30am today; Powell’s speech on “The Federal Reserve’s framework for monitoring financial stability” on Wednesday; and Williams’ speech on global economic issues on Friday – should help clarify whether the Fed’s narrative has reached a turning point.

Below are four key points to watch in these speeches, with Clarida due in just a few minutes.

1. Get back to neutral? Lost in Powell and Clarida’s comments a few weeks back was that both officials reaffirmed the plan to get back to neutral. Given a labor market beyond full employment, inflation at target and growth expected to remain above potential, both officials are expected to once again reiterate this expectation. A reaffirmation of this view would support the interpretation that the market has been too aggressive in pricing out rate hikes next year.

Where is neutral? Fed leadership should continue to reference the median projections from the Summary of Economic Projections (3%), which would be consistent with three more rate hikes, including the likely increase at the December FOMC meeting. But with Powell emphasizing that neutral is highly uncertain, watch for any signs that Fed leadership may interpret recent market developments and the slowing of growth in interest rate sensitive sectors, namely housing and capex, as evidence that neutral could be lower than they previously thought.

2. Financial conditions still accommodative? Despite the tightening of financial conditions since early October, Fed officials have continued to describe financial conditions as accommodative. Deutsche Bank’s FCI suggests that this description could be downgraded to neutral, though the Chicago Fed FCI, which has been referenced by some Fed officials including Brainard in her aforementioned speech, remains in accommodative territory. A downgrade to the Fed’s view on financial conditions should primarily reflect less need to move to a restrictive stance, rather than weaken the argument for getting to neutral. However, this tightening could also lead to a softer baseline growth outlook and greater downside risks that could undermine the argument for a few more hikes before pausing.

3. How worrying is slowing global growth? At the center of the market’s reassessment of the Fed’s hiking path in recent weeks appeared to be the acknowledgment from both Powell and Clarida that global growth was slowing and becoming more of a headwind for US prospects. A weaker foreign growth impulse could directly soften the US growth outlook via less demand for US goods and could indirectly impact the Fed’s assessment of the outlook by boosting the dollar as the market prices out monetary policy tightening by other central banks. Over the past few weeks there has been additional corroborating evidence from the European PMIs that growth indicators outside the US have indeed softened. While Fed officials are expected to continue to flag these developments as presenting a headwind to US growth, this should be considered in terms of the Fed’s constant assessment of the risks to their outlook. Weaker growth outside the US and the stronger dollar that is likely to accompany it should limit upside risks to US growth and help mitigate overheating concerns. However, Deutsche does not expect these developments to override the solid signal from domestic demand conditions that at least a neutral monetary stance is warranted.

4. Is confidence in on-target inflation wavering? After hitting the Fed’s target, measures of core inflation have softened over the past few months, with the core CPI recently slipping to levels below which are consistent with the Fed’s target. Moreover, the rolling over in health care PPI inflation portends some weakness in the corresponding component in the PCE price index, a development which, if it were to occur, would reverse the rise in health care inflation over the past two years that was critical to the Fed achieving its inflation target. The potential emergence of softer inflation pressures has been the most compelling reason for the Fed to sound less convinced about having to march directly to a restrictive stance. Fed officials have so far not wavered in their assessment that measures of trend inflation remain close to target, and it is likely too early for any change in this assessment in this week’s Fedspeak, particularly given the still supportive signal from strong domestic demand. But it bears close watching, especially from those officials (e.g., Brainard and particularly Evans) who previously worried about too low inflation but who pivoted in a more hawkish direction as it became clear inflation was returning to target.

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As legacy brick-and-mortar retailers lagged behind on Black Friday while e-commerce enjoyed the bulk of sales growth (though they met expectations for strong sales, big-box stores struggled with a series of glitches), Amazon confirmed on Tuesday that the long holiday shopping period was every bit as lucrative as analysts had anticipated.

The company announced Tuesday that Cyber Monday was its single biggest shopping day in history. The company processed the largest number of product orders in one day than at any point in its history, and yet that may not have been enough as AMZN stock is down 1% in the pre-market amid concerns this may mark the peak of US consumption. On Black Friday and Cyber Monday combined, Amazon customers ordered more than 18 million toys and 13 million items of clothing and accessories (though Amazon hasn’t released dollar figures).

Amazon’s Echo Dot Alexa was its top-selling product in any category. But strong sales weren’t limited to holiday gifts: Whole Foods notched an all-time record of turkeys sold during Thanksgiving season. Amazon’s blowout day comes less than a month after Chinese rival Alibaba reported its strongest ‘Singles Day’ sales ever, posting a new record in dollar terms despite the sagging yuan.

The strong Cyber Monday caps off a period of double-digit sales gains for November: Total US online spend reached a record $7.9 billion, up 19% y/y, according to Adobe Analytics. This is slightly higher than the $7.79 billion AA had initially anticipated. Thanksgiving Day and Black Friday saw $3.7 billion (+28% y/y) and $6.2 billion (+23.6% y/y) in sales, while Saturday and Sunday both set new records, making for the biggest online shopping weekend in the US with $6.4 billion in sales, growing faster than Black Friday and Cyber Monday with more than 25% on each day. The full season thus far has driven $58.5 billion in online sales alone, a 20% increase. That breaks down to $1 billion of digital sales per day.

Here’s a roundup of holiday weekend highlights:

• Sales by small and medium-sized businesses worldwide grew more than 20 percent on Black Friday year-over-year.
• Throughout the Turkey 5, Amazon.com customers ordered more than 180 million items.
• Prime members got into the Christmas spirit over the holiday weekend—Christmas lights were a bestseller on Prime Now.
• The best-selling products at Amazon 4-star and Amazon Books over the Turkey 5 weekend included the all-new Echo Dot, Becoming by Michelle Obama, the Amazon Smart Plug, and the L.O.L. Surprise Series toys.
• The best-selling products at Amazon Pop-Up device kiosks over the Turkey 5 weekend included the all-new Echo Dot and the Amazon Smart Plug.
• Customers ordered more than four million toys and electronics on the mobile app on Black Friday.
• The best-selling products across Amazon.com on Cyber Monday included the all-new Echo Dot, AncestryDNA: Genetic Testing Ethnicity, Bose QuietComfort 25 Acoustic Noise Cancelling Headphones for Apple devices, Becoming by Michelle Obama, Jenga, and Instant Pot DUO60 – 6 Quart.

Strong sales this year contrast with a relatively weak season last year that dampened expectations for retailers heading into the new year. Still, while any growth is good, the lopsidedness in favor of e-commerce can be problematic because retailers earn less on e-commerce shipments than they do on in-store purchases thanks to shipping costs, according to Bloomberg.

“Stores have been gaining more traction, but online is growing faster,” said Poonam Goyal, an analyst for Bloomberg Intelligence. “The higher shipping expenses are still going to be a bigger drag on margin.”

Though retail CEOs have seized seemingly every opportunity to tout the strong sales outlook for the rest of the holiday season through Christmas, retailers’ shares have struggled as investors worry that this could be the peak for the economic cycle. Overall, physical stores saw foot traffic shrink 6.6% year-over-year, thanks in part to brutally cold weather in the Northeast. However, consumer-tech, electronics and appliances were a bright spot, with sales climbing 6.4% over the weekend, according to Customer Growth Partners, which believes overall sales growth will increase 5.1% to $701 billion this season between e-commerce and brick-and-mortar.

Retailers also face difficulties balancing the competition for deals with maintaining margins, something made more complicated by e-commerce shipping costs.

“Shoppers and stores alike will have a happy holiday this year – assuming retailers can maintain their margin discipline,” said Craig Johnson, president of Customer Growth Partners. “Looking forward, the key issue is whether this pace can be sustained into the new year and beyond.”

Looking ahead, there’s still one more blowout shopping day left on the calendar. CGP expects sales on Dec. 22, the Saturday before Christmas, to supersede Black Friday as the season’s biggest shipping day: Sales are projected to hit $26 billion in a single day.

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Tesla stock is down 2% in the premarket session after Reuters reported that the company’s vehicle sales in China for October tumbled an astonishing 70% from last month. According to the China Passenger Car Association, Tesla sold just 211 cars in the world’s largest auto market in October.

The 70% drop in sales comes after the company admitted in October that tariffs were going to make for a “challenging competitive environment”, adding the following:

Tesla continues to lack access to cash incentives available to locally produced electric vehicles in China that are typically around 15% of MSRP or more. Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China. This makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles.

This news follows last week’s report that Tesla was slashing prices on the Model S and Model X in the Asian country in order to try and offset the cost of tariffs for customers amid sliding demand. This purposefully under-the-radar announcement came on Thanksgiving day, and now sees Tesla bearing the brunt of costs associated with the ongoing trade war between China and the United States that it once said it would pass on to customers. We suggested that perhaps demand was not as robust as many thought in the country, as well. It looks as though these suspicions have been confirmed.

The price cuts came at a time when EV sales in China have been the silver lining of the entire auto industry, as we recently documented when discussing the shrinking global automobile market. EV sales were the sole sector of growth last month in China, increasing by 51% Y/Y. For the first 10 months of the year, sales were up 76% to 860,000 fueled by government subsidies and favorable policies, as well as still prevailing novelty. 

It’s safe to say that Tesla may not have caught that country-wide tailwind.

It was also revealed on Sunday that the company was “bleeding money like crazy” and apparently just days away from dying in 2018. Elon Musk told Axios in an HBO interview that Tesla “faced a severe threat of death” during its Model 3 Production ramp earlier this year. 

“Tesla really faced a severe threat of death due to the Model 3 production ramp. Essentially, the company was bleeding money like crazy, and if we didn’t solve these problems in a very short period of time, we would die. And it was extremely difficult to solve them.”

The trade tensions between the U.S. and China don’t look as if they’re going away anytime soon, either.

Yesterday, President Trump made it clear that he was going to push forward with additional tariffs on China. Minutes after the market closed on Monday, the WSJ reported that with just four days to go before his summit with China’s President Xi, Donald Trump said he expects to move ahead with boosting tariff levels on $200 billion of Chinese goods to 25%, calling it “highly unlikely” that he would accept Beijing’s request to hold off on the increase.

This bad news for Tesla comes in the midst of a full scale slowdown in the Chinese car market. The outlook for automobiles in China doesn’t seem to be getting any better, according to a new Reuters profile that recently highlighted how the world’s largest car market is still on pace to approach its first sales contraction in almost 30 years, according to industry data.

Now that we know that Tesla likely lowered prices (read: destroyed its margins) in response to anemic sales and not just as a favor to absorb tariff costs, which seemed like the ridiculous explanation the company wanted the public to believe, we can’t help but wonder if the company will find itself back in the precarious financial situation that Musk just described during Sunday’s Axios interview.

Channel NewsAsia said overnight that (surprise) “Tesla did not respond to repeated calls and written requests for comment on Tuesday.”

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US index futures and European shares slumped on Tuesday in a volatile, illiquid session punctuated by some headline confusion, while gains in Asian equities were limited after President Donald Trump said he still intends to go ahead with raising tariffs on China imports from 10% to 25% and that it was highly unlikely he would accept China’s request to refrain from the increase, just days before meeting with his counterpart Xi Jinping.

While ES losses were modest, it is worth noting that earlier in the session, S&P futures swung sharply, gaining as much as 0.5%, then falling back into negative territory, after algos misinterpreted comments from China foreign ministry spokesman Geng Shuang. As we reported earlier, during a media briefing Geng first said that Presidents Trump and Xi agreed to reach mutually beneficial agreements, sparking a vicious rally in futures. Just moments later, however, futures erased gains when Geng later said he was referring to a phone call on Nov. 1. The result was the following:

Following these fireworks, contracts on the Dow, S&P and Nasdaq pointed to a drop at the opening, while Treasuries and the dollar held steady before the Fed’s top two officials were set to speak in the next 48 hours.

European equities gave up initial gains and posted small losses as basic resources and travel names underperformed, with the Stoxx Europe 600 Index edging modestly lower (-0.1%), led by raw materials producers, while bonds rose across Europe and the euro currency edged lower. The pound weakened as traders mulled prospects for parliamentary approval of the Brexit deal, which Trump said could jeopardize Britain’s ability to strike a trade pact with the U.S.

Earlier in the session, Asian markets were mostly positive as the region took impetus from the performance on Wall St, where all majors finished with firm gains on return from the Thanksgiving weekend and with retailers buoyed on the back of Black Friday and Cyber Monday sales. ASX 200 (+1.0%) and Nikkei 225 (+0.6%) were lifted from the open with Australia led higher by tech and financials, while a pullback in USD/JPY limited the upside for the Japanese benchmark. Elsewhere, Hang Seng (-0.2%) and Shanghai
Comp. (+0.1%) were mixed with China somewhat dampened by Trump’s hardball tactics ahead of the meeting with Chinese President Xi at this week’s G20, in which he suggested an intention to proceed with raising tariffs on China imports from 10% to 25% and also warned to place tariffs on the remaining USD 267bln of Chinese imports if they fail to reach a favourable outcome for the US. Furthermore, a slowdown of Chinese Industrial Profit growth and concerns in the Hong Kong property sector also contributed the cautiousness in Chinese markets.

In addition to today’s 8:30am ET comments from Fed vice chair Clarida, trade remains firmly in investors’ minds before leaders of the two biggest economies meet in Buenos Aires at the end of the week. Trump’s comments that it is likely the US will slap tariffs on the remaining Chinese imports and raise tariffs on existing tariffed products have weighed on optimism for U.S. stocks, which climbed on Monday amid hopes a strong start to the holiday season thanks to record online sales will keep growth on track.

Meanwhile, Fed speakers will be closely watched for any indications of a change in Fed thinking over continued rate hikes. Today Fed vice chair’s New York speech at 8:30am will be the main attraction, while Chair Powell’s speech on Wednesday will be parsed for any hints on prospects for a pause in rate increases next year after traders reduced expectations for the pace of monetary policy tightening.

Elsewhere, emerging market currencies weakened and their shares traded little changed. Bitcoin steadied near $3,700 after plunging 14 percent Monday.

In overnight political news, US Special Counsel Mueller’s office said former Trump campaign manager Manafort lied to FBI and Special Counsel in violation of plea agreement.

In commodities, Brent (+0.2%) and WTI (Unch) are nursing initial losses as focus starts turning to the G20 summit over the weekend where markets may get initial hints of what to expect at the Dec 6th OPEC meeting in Vienna. The Saudi Crown Prince, Russian President and US President are to meet, possibly on the side-lines to decide the future of the global oil market. Talk around the market notes that Prince Mohammed Bin Salman may not able to defy US President Trump’s aim for lower oil prices after the White House stood behind the prince in regard to the killing of journalist Khashoggi. Nonetheless, traders will be watching the summit closely, while in the nearer-term, today will see the release of the weekly API where forecasts see headline crude stockpiles printing a drawdown of 0.6mln barrels.

Gold is trading relatively flat as the dollar holds steady following comments from Trump that overnight that he still intends to raise Chinese import tariffs to 25%; these comments come ahead of this week’s G20 summit. Additionally, US-China trade pessimism has caused copper prices to fall for the 3rd consecutive session due to demand concerns. Iron ore futures have dropped to their lowest level in over 4 months, dropping by 5% over concerns that steel prices are to remain pressured by slower demand.

Expected data include Conference Board Consumer Confidence. Bank of Nova Scotia, Couche-Tard, and Salesforce are among companies reporting earnings.

Market Snapshot

• S&P 500 futures down 0.2% at 2,663.0
• STOXX Europe 600 up 0.07% to 358.59
• MXAP up 0.4% to 151.86
• MXAPJ up 0.3% to 486.89
• Nikkei up 0.6% to 21,952.40
• Topix up 0.7% to 1,644.16
• Hang Seng Index down 0.2% to 26,331.96
• Shanghai Composite down 0.04% to 2,574.68
• Sensex up 0.5% to 35,524.01
• Australia S&P/ASX 200 up 1% to 5,728.28
• Kospi up 0.8% to 2,099.42
• German 10Y yield fell 1.2 bps to 0.349%
• Euro down 0.04% to $1.1323
• Italian 10Y yield fell 13.6 bps to 2.9%
• Spanish 10Y yield fell 2.6 bps to 1.536%
• Brent futures up 0.6% to $60.83/bbl
• Gold spot little changed at $1,223.10
• U.S. Dollar Index up 0.1% to 97.15

Top Overnight News from Bloomberg

• President Donald Trump said he’ll likely push forward with plans to increase tariffs on $200 billion of Chinese goods, indicating he would also slap duties on all remaining imports from the Asian nation if negotiations with China’s leader Xi Jinping fail to produce a trade deal
• U.K. Prime Minister Theresa May will put her Brexit deal to Parliament for a decisive vote on Dec. 11, but after her plan was savaged from all sides, the signs are she’s on course to lose. President Trump Says Brexit deal could hurt plans for trade pact with U.S.
• The Brexit deal negotiated by Prime Minister Theresa May will lower economic output over the coming decade compared with staying in the European Union, researchers said. The deal would lower gross domestic product per capita by between 1.9 percent and 5.5 percent versus EU membership, according to a joint paper. Leaving without a deal could lower output per head as much as 8.7 percent.
• Italy’s populist government failed to thrash out a new deficit target for the European Union in late night talks but cracks are starting to show in its battle with the bloc over spending
• Donald Trump plans to keep Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross amid speculation of a broader shakeup in the president’s Cabinet, according to three people familiar with his thinking
• European Union Trade Commissioner Cecilia Malmstrom sounds an upbeat note about EU talks with the U.S. on revamping global commercial rules while saying the verdict is out on whether President Donald Trump’s administration will stay engaged
• The Turkish lira – – on track for its best November since 2002 — is once again turning into a favorite for fast-money investors and hedge funds. Short-term carry positions have increased by an estimated $5.4 billion since the end of August, according to QNB Finansbank, an Istanbul-based lender
• The Brevan Howard Asia Fund bucked a difficult October for macro funds, and is posting its best return in five years, according to a person with knowledge of the matter

Asian equity markets were mostly positive as the region took impetus from the performance on Wall St, where all majors finished with firm gains on return from the Thanksgiving weekend and with retailers buoyed on the back of Black Friday and Cyber Monday sales. ASX 200 (+1.0%) and Nikkei 225 (+0.6%) were lifted from the open with Australia led higher by tech and financials, while a pullback in USD/JPY limited the upside for the Japanese benchmark. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (+0.1%) were mixed with China somewhat dampened by Trump’s hardball tactics ahead of the meeting with Chinese President Xi at this week’s G20, in which he suggested an intention to proceed with raising tariffs on China imports from 10% to 25% and also warned to place tariffs on the remaining USD 267bln of Chinese imports if they fail to reach a favourable outcome for the US. Furthermore, a slowdown of Chinese Industrial Profit growth and concerns in the Hong Kong property sector also contributed the cautiousness in Chinese markets. Finally, 10yr JGBs were uneventful as prices took a breather from its extended but gradual uptrend and with today’s 40yr auction largely ignored despite increases in the b/c and accepted prices.

Top Asian News

• Hong Kong’s Home Market Suffering Worst Declines Since 2016
• Day Two Rebound in Asia Stocks Closes an Eye on Trade Rhetoric
• Genting Malaysia Says Fox World Lawsuit Won’t Impact Operations

European cash indices gave up initial gains (Eurostoxx 50 -0.1%) following a relatively flat open after pre-market gains in index futures were short-lived. Equity futures staged a pre-cash open rally after it was reported that a Chinese Foreign Ministry spokesman was quoted as stating that US President Xi and US President Trump had agreed to mutually beneficial agreements. However gains in futures markets were pared after it was later reported that this was in reference to a November 1st phone call and thus was viewed as stale by the market, particularly considering the hardball interview by Trump in the WSJ yesterday ahead of this week’s G20 summit. On an index basis, the SMI lags its peers (-0.5%) with Credit Suisse (-1.7%) lower following a broker
downgrade at Credit Suisse. In terms of sector specifics, performance is relatively mixed with slight underperformance in material names in-fitting with recent price action in the complex. To the upside, utility names modestly outperform, albeit the moves thus far across the board are relatively small in terms of magnitude. Individual movers this morning include Dialog Semiconductor (-1.4%) amid Apple-inspired losses (post-Trump threat of potential tariffs on iPhones and laptops), Apple share are down 1.7% pre-market. Elsewhere, Rexel (+1.9%) are firmer following a broker upgrade at Credit Suisse, Thomas Cook (-24.5%) shares are notably underperforming following a disappointing trading update, dragging Tui (-4.2%) lower in sympathy.

Top European News

• StanChart Is Said to Weigh a Simpler Structure to Control Costs
• Bain Is Said to Explore Takeover Bid for Germany’s Osram Licht
• UBS Takes Profit on Italy Two-Year Bonds as Budget Tensions Cool
• Thomas Cook’s Dismal Year Gets Worse With Latest Profit Warning
• Italy Compromise Has Convinced One Fund to Add European Banks

In FX, the DXY was overall bid vs G10 counterparts with the aid of the GBP weakness due to the latest Brexit developments. Moreover, Citi’s rebalancing model points to modest USD buying vs. peers going into month end, while Nordea also notes tomorrow’s HIA which is the cut-off date if companies wish to convert foreign currency into USD along with SOMA that happens to fall on Friday as well. The index is currently hovering above 97.000 within a narrow range around the big figure.

• GBP – The standout underperformer vs. peers amid comments from UK Remain loyalist Fallon who said it may be possible to delay the date UK leaves the EU to renegotiate a better deal, inflicting a blow to UK PM May’s so-called “best deal”. As such Cable fell to a low print of 1.2734 ahead of the mid-November base at 1.2724, having already given up the 1.2800 handle following comments from US President Trump who noted that UK may not be able to trade with the US, in an interview last night. If the mid-November low (or Raab trough) is breached, the next levels to note are 1.2696 (October low) and 1.2662 (YTD low). However, looking further ahead Credit Suisse is more optimistic on the outlook for Sterling, with their Cable forecast at 1.4000 by end-2019
• EUR – Holding up well vs. the pound above 0.8850 but not quite challenging the 100DMA 0.8884, though the single currency is  lower vs. the buck, with the pair tripping some stops at 1.1310. Obviously, 1.1300 is nearest support and if breached more stops  are reported at 1.1290.
• NZD,AUD – Notable, albeit marginal G10 outperformers vs. the buck, with the Kiwi staging another recovery following the weak data (trade overnight), and now looking ahead to the RBNZ semi-annual FSR tonight. NZD/USD hovering just below 0.6800 and AUD/USD near the middle of a 0.7270-15 band.

In commodities, brent (+0.2%) and WTI (Unch) are nursing initial losses as focus starts turning to the G20 summit over the weekend where markets may get initial hints of what to expect at the Dec 6th OPEC meeting in Vienna. The Saudi Crown Prince, Russian President and US President are to meet, possibly on the side-lines to decide the future of the global oil market. Talk around the market notes that Prince Mohammed Bin Salman may not able to defy US President Trump’s aim for lower oil prices after the White House stood behind the prince in regard to the killing of journalist Khashoggi. Nonetheless, traders will be watching the summit closely, while in the nearer-term, today will see the release of the weekly API where forecasts see headline crude stockpiles printing a drawdown of 0.6mln barrels. Gold is trading relatively flat as the dollar holds steady following comments from Trump that overnight that he still intends to raise Chinese import tariffs to 25%; these comments come ahead of this week’s G20 summit. Additionally, US-China trade pessimism has caused copper prices to fall for the 3rd consecutive session due to demand concerns. Iron ore futures have dropped to their lowest level in over 4 months, dropping by 5% over concerns that steel prices are to remain pressured by slower demand.

Looking at the day ahead, we’ll get various house price data points including the September FHFA house price index reading, Q3 house price purchase index reading and September S&P CoreLogic house price data. On top of that we’ll get the November consumer confidence survey which is expected to slip nearly 2pts to 135.8 in light of the recent wobbles in the equity market. That is, however, in the context of the 18-year high that the index reached last month. Away from the data, there will be plenty of focus on Fed Vice-Chair Clarida’s speech in New York today at 8.30am ET, especially around the topics of how he characterizes recent volatility in markets and the prospects for domestic and  global growth. Fellow Fed officials Bostic, Evans and George will also speak while the ECB’s Nouy, Costa and Mersch also speak at various stages. It’s worth also noting that starting today and continuing until Thursday, the three top candidates to take over from Merkel as head of the CDU will hold panel debates.

US Event Calendar

• 9am: S&P CoreLogic CS 20-City MoM SA, est. 0.2%, prior 0.09%; CS 20- City YoY NSA, est. 5.2%, prior 5.49%
• 8:30am: Fed Vice Chairman Clarida Speaks in New York
• 9am: S&P CoreLogic CS 20- City NSA Index, prior 213.7; CS US HPI NSA Index, prior 205.8
• 10am: Conf. Board Consumer Confidence, est. 135.9, prior 137.9; Present Situation, prior 172.8; Expectations, prior 114.6
• 2:30pm: Fed’s Bostic, Evan and George Speak on Panel

DB’s Jim Reid concludes the overnight wrap

We took our three year old Maisie to the building site that is our new house over the weekend and this may have been a mistake as over the last two days she keeps on asking us why our new house is broken. She was particularly upset that a lot of windows and walls were missing and said she doesn’t want to live there as it would be too cold. Meanwhile Daddy’s bank account feels broken this morning as there was talk yesterday that one of our big suppliers might be about to call in the administrators. They have a healthy deposit of ours so it’s very annoying. It’s fair to say that costs are escalating from all angles and the EMR may need to still be running from an old people’s home in 50 years time to fund this.

From broken houses to slightly less broken markets. Given that the two Mondays prior to yesterday had seen moves of -1.66% and -1.97% for the S&P 500, yesterday reversed the trend as better news percolated through on some of the negative stories that have dominated of late. The S&P 500 closed last night +1.56% with the DOW and NASDAQ also up +1.46% and +2.06% respectively. The NYFANG index advanced +3.72%, despite Apple’s underperformance (initially down -1.18% before rebounding to close +1.35%) as the US Supreme Court signalled its willingness to hear a class action lawsuit over its app store pricing. Financials really led the way with the S&P Banks index rallying +2.30% for its best day since July. They had their European counterparts to thank for that, with the STOXX Banks index (+2.91%) seeing its best single day performance since July 2017. The broader STOXX 600 closed +1.23% and DAX +1.45%.

Italy was the main catalyst as sentiment improved on the potential for more positive negotiations with the European Commission. As we reported yesterday, the weekend saw less confrontational remarks from Salvini and Juncker. In addition, Salvini said yesterday that the government is “not getting stuck” over the decimals in the deficit target while fellow Deputy Premier Di Maio confirmed that “if, as part of the negotiation, we need to reduce the forecast deficit slightly, that’s not important to us.” Di Maio went on to say that “the issue is not the conflict with the EU on a deficit of 2.4%, what’s important is that not even a single person is kept out of the core measures.” Prior to this, we also had headlines on Bloomberg suggesting that an official for the League had said that the Government was looking at a new deficit target of 2.2% to 2.3%. Late in the evening, political leaders Conte, Salvini, and Di Maio released a joint statement after their meeting, confirming their less confrontational tone and again  deemphasising the decimal place of the deficit number.

As we go to print headline are coming through from Italian finance minister Castelli that the deficit target is “almost certain” to be 2.2%. The question on everyone’s lips is what is the compromise number that the European Commission could realistically accept? A deficit in the 2.2% area is still unlikely to satisfy the EC, however a willingness to negotiate might be seen as the Italian government being aware of the implications of its actions. The Commission could even accept a somewhat vague framework as a rationale to defer a formal decision on Italy until into 2019, potentially alleviating some of the near-term event risk for Italy-linked
assets.

Before all this news the FTSE MIB closed yesterday up +2.77% while Italian Banks (+4.83%) had their best day since June. Two- and ten-year BTPs rallied -11.2bps and -13.8bps respectively – albeit off their yield lows for the session. Speaking of Italy, the ECB’s Peter Praet said yesterday that there has been very limited spill-over from a tightening of financial conditions in Italy to the broader Euro Area, but that conditions in Italy are “unsustainable” and “so something will have to give.” Praet’s general tone outside of this was constructive. His comments suggested that QE will finish in December as widely expected, but also that the ECB will have to clarify was it meant by “reinvesting for an extended period of time.” Praet also confirmed that guidance is “a very strong expectation” but also noted that “downside risks have increased noticeably.” This was notable as the Council has previously said that risks are “balanced.” Praet’s speech raised the anticipation levels for Draghi, who spoke in the afternoon. While his speech was virtually a copy and paste from his last on November 16th, he was later quoted as saying that “world growth  momentum has slowed considerably” which is much stronger language compared to that used in the past. The December 13 ECB meeting will be key, and our economists still expect the Governing Council to announce the end of QE. Incoming data will dictate the evolution of policy, but we still expect growth and inflation to progress sufficiently to allow for an interest rate hike in September 2019.

Praet and Draghi are scheduled to speak again this week, on Wednesday and Thursday, respectively. We’ll also get several consequential communications from Federal Reserve officials, with speeches scheduled today for Vice Chair Clarida, tomorrow for Chair Powell, and Friday for NY Fed President Williams. The bottom line so far is that he doesn’t think there is sufficient evidence to ratify the market’s dovish interpretation of recent Fed communications, though that could change depending on what the Fed leadership says about the neutral rate, financial conditions, and global growth. So an important couple of speeches today and tomorrow from Clarida and Powell.

This morning in Asia markets are largely higher with the Nikkei (+0.88%), Shanghai Comp (+0.42%) and Kospi (+0.84%) all up while the Hang Seng (+0.01%) is trading flat after erasing earlier losses. Sentiment seems to have been impacted by US President  Trump’s rhetoric, after an interview with the WSJ, that he will likely push forward with plans to increase tariffs on $200 billion of Chinese goods. He also suggested that the US would likely impose tariffs on the remainder of Chinese imports ($267bn) if the trade talks on the sidelines of the G20 fail. So the pressure builds ahead of the summit. Futures on S&P 500 (-0.18%) are pointing towards a softer start.

Back to yesterday, Bund yields edged up +2.1bps yesterday with the Italy news more important than any ECB slowdown worries. That move for BTPs and Bunds means the spread between the two yesterday was -15.9bps tighter and now at the tightest level in nearly three weeks. Meanwhile Treasury yields also backed up +2.0bps and are now sitting at 3.06%. Oil had a part to play in  that with Brent and Crude bouncing +3.13% and +2.54% respectively – despite the news that Saudi Arabia had again raised its oil output – perhaps with hopes that the oversupply condition will be addressed at the G20 this week or the OPEC meeting next week. Tensions between Russia and the Ukraine over the weekend seemed to have less of an impact.

Not hurting the decent day for equities yesterday was news of a merger in the Greek Banking sector, however a sub-index of Greek banks did give up an early morning surge of as much as +11.57% to finish flat. A pretty substantial move and retracement! In the US, the auto sector advanced +3.98% for its sixth best day of the year, after General Motors announced a broad new restructuring plan. It plans to cut over 14,000 jobs and close five North American manufacturing plants next year, barring an agreement with its unions. GM’s share price rose +4.79% to a four-month high.

Elsewhere on Brexit, Donald Trump has suggested PM May’s Brexit agreement could threaten a US-UK trade deal. He told reporters the withdrawal agreement  “sounds like a great deal for the EU” and meant the UK might not be able to trade with the US. The PM’s office insisted the deal is “very clear” the UK would be able to sign trade deals with countries around the world.

To the day ahead now, where this morning in Europe we’ll get November confidence indicators in France and Italy followed by the CBI’s retailing reported sales data in the UK for November. In the US this afternoon we’ll get various house price data points including the September FHFA house price index reading, Q3 house price purchase index reading and September S&P CoreLogic house price data. On top of that we’ll get the November consumer confidence survey which is expected to slip nearly 2pts to 135.8 in light of the recent wobbles in the equity market. That is, however, in the context of the 18-year high that the index reached last month. Away from the data, there will be plenty of focus on Fed Vice-Chair Clarida’s speech in New York today at 1.30pm GMT, especially around the topics of how he characterizes recent volatility in markets and the prospects for domestic and  global growth. Fellow Fed officials Bostic, Evans and George will also speak this evening at 7.30pm GMT while the ECB’s Nouy, Costa and Mersch also speak at various stages. It’s worth also noting that starting today and continuing until Thursday, the three top candidates to take over from Merkel as head of the CDU will hold panel debates.

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Six month after Hungarian President Viktor Orban succeeded in driving his former mentor, and current neemsis George Soros out of Hungary, the Hungarian-born billionaire financier and his “Open Society” Foundation that has financed an army of liberal NGOs across Europe and the US has been driven out of yet another country.

According to the Guardian, Soros’ Open Society Foundation is formally withdrawing from Turkey after the founder of its Turkey organization was arrested and charged with supporting an opposition figure accused of trying to overthrow the government of Turkish President Recep Tayyip Erdogan.

The organization announced its decision to withdraw from Turkey amid an interior ministry investigation seeking to uncover links between the organization and protests at Gezi Park in Istanbul in 2013. One of the founders of the Turkish OS branch, Hakan Altinay, was arrested along with 12 others two weeks ago and accused of supporting jailed Osman Kavala, an opposition activist accused of trying to overthrow the Hungarian government with mass protests. Kavala has been accused of supporting terrorism within Turkey, and Open Society has been accused of supporting Kavala.

Back in May, OS closed its Budapest Office and moved its operations to Berlin after the country passed an “Stop Soros” law aimed at making it more difficult for foreign NGOs to operate in the country.

In a speech last week, Erdogan accused Soros of trying to sow instability and discord in Turkish society, and of organizing destabilizing protests.

One of its founders in Turkey, Hakan Altinay, was among 13 people detained 10 days ago. They were accused of supporting jailed rights activist Osman Kavala in trying to overthrow the government through mass protests.

In a speech last week, Erdoğan linked those arrests to Soros. “The person [Kavala] who financed terrorists during the Gezi incidents is already in prison,” he told a meeting of local administrators.

“And who is behind him? The famous Hungarian Jew Soros. This is a man who assigns people to divide nations and shatter them. He has so much money and he spends it this way.”

Though it denied links to the protests, Open Society told the Guardian that it would nevertheless seek to close its office in Istanbul and liquidate its Turkish operations as swiftly as possible. The organization added that it was unsure whether it will be able to continue its Turkish operations.

The foundation said that “new investigations” were trying to link it to the Gezi protests. “These efforts are not new and they are outside reality,” it said

The foundation said it would apply for the legal liquidation of its operations as soon as possible.

According to the New York Times, a representative for Open Society said maintaining the organization’s operations in Istanbul had become “completely untenable.”

“We are deeply dismayed and disappointed that the foundation had to close,” an Open Society spokeswoman, Laura Silber, said on Monday. But, she said, “it became completely untenable.”

Open Society purports to support “justice and human rights” in more than 100 countries; but in more recent years, it has primarily focused on Soros’ liberal agenda of open borders and free trade while resisting the wave of populist sentiment that has swept across Europe and the US.

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Demonstrating how on edge the market is over any favorable (and vice versa) developments in the ongoing US-China trade war, a couple of conflicting headlines out of China shortly before 3am ET sparked turmoil across asset classes. 

Just a few hours after Trump’s interview with the WSJ, in which the president signaled that he would slap tariffs on remaining Chinese imports and he’ll likely push forward with plans to increase tariffs on $200 billion of Chinese goods, and which halted a strong Monday rally, S&P futures surged gaining as much as 0.5%, then falling back into negative territory, on comments from China foreign ministry spokesman Geng Shuang.

First, Bloomberg reported that during a briefing, Geng said that President Trump and  Chinese leader Xi Jinping agreed to reach mutually beneficial agreements, sparking a rally in futures and a plunge in the dollar.

• TRUMP, XI AGREED TO REACH MUTUALLY BENEFICIAL AGREEMENTS: GENG

However, this quickly reversed and futures erased gains when moments later Geng said he was referring to the phone call on Nov. 1 which Trump had already tweeted about and which has now been long priced in if not forgotten.

• CHINA’S GENG REFERS TO NOV. 1 TRUMP-XI PHONE CALL

The result was the following violent move in the overnight S&P futures, which initially surged nearly 25 points in a matter of seconds, only to reverse the entire move as it emerged that the first headline was taken out of context.

The Bloomberg Dollar Spot Index also went on a roundabout trip between gains and losses as algos went from one extreme to another on the trade headlines.

While nothing had actually changed or been resolved, and there was no actual news following the Chinese presser, the dramatic moves show just how sensitive algos are to any changes in rhetoric and posture, and an indication of how much “coiled” upside there is in risk assets should Trump and Xi makes some soothing comments at the upcoming G-20 summit.

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