Morning Note: Beholden to stocks…

Equity markets are attempting to claw back yesterday’s losses, as the President claws back yesterday’s no-stimulus-till-post-election pledge: A perfect example of how tweet-possessed traders have become, and how strong the belief in the reflexive nature of the stock market; i.e., that rising stock prices engender robust animal spirits (economic action), and vice versa.

A similar story is unfolding across the pond:

Bloomberg) — 

The U.K. government will pull out of Brexit trade negotiations with the European Union next week if there is no clear deal in sight, according to a person familiar with the matter.

Boris Johnson has said he wants the outlines of a deal to be clear by Oct. 15. EU officials, however, have said they won’t be pressured into making concessions and are prepared to call the prime minister’s bluff if he doesn’t compromise, effectively daring Johnson to walk away.

A person familiar with the British position said Johnson’s team would indeed pull the plug on talks if no clear landing zone for a deal has been identified by that date. The analysis adds to pressure on the talks which are resuming in London.

We’ll see how beholden Europe is to equity prices. I.e., should the U.K. crash out of the EU with no trade deal, well, “crash” I suspect will aptly describe the market’s initial reaction. 

All but 2 of the 16 Asian markets we track were in rally mode overnight. Europe — rattled a bit by the above news item I suspect — isn’t joining the maybe-some-stimulus-back-on party this morning; 12 of the 19 bourses we track are in the red so far. U.S. major averages are higher across the board: Dow up 352 points (1.27%), S&P 500 up 1.15%, Nasdaq up 1.15%, Russell 2000 up 1.03%.

The VIX (SP500 implied volatility), at a dangerously high 29.00 is down -1.63%, VXN (Nasdaq vol), at 36.04 (dangerous!) is down -1.77%.

Oil futures are down -2.85%, gold’s down -0.30%, silver’s up 1.45%, copper futures are up 2.83% and the ag complex is up 1.16%.

The 10-year treasury is trading lower (yield higher) and the dollar is flat, -0.03%.

Our core portfolio, with 14 of its 18 positions in the green, is starting the day up 0.73%. Banks, materials, base metal commodities, industrials and silver are leading the way higher, while gold, Verizon, the yen and energy stocks are drags… 

Next up this week’s main message.

Have a great day!


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