Sentiment Sours Again As Uneasy Calm Shattered

N.B. – Publication of this note will resume on Tuesday 22^nd April. In the meantime, have a very Happy Easter!

WHERE WE STAND – I certainly shan’t be talking any sort of victory lap, but the rather uneasy gut feeling I had yesterday about the state of the market turned out to be rather prescient.

That said, with the long weekend looming, and today being a synthetic Friday, I’ll try to keep things relatively short.

• Sentiment soured rather significantly, with stocks slumping across the board, as a confluence of bad news including Nvidia being subject to tighter chip export rules, a US probe into rare earth minerals, and dismal figures from ASML all arrived at once. This rather proves how the market had been lulled into something of a false sense of security in recent sessions, with that sense of calm subsequently being shattered. I remain an equity rally seller here, though still see it as unlikely – for the time being – that we break below last week’s lows
• Some degree of (v brief) positivity did, though, stem from reports that China would be open to talks with the US on trade, however these reports contained so many ‘ifs’, ‘buts’, and ‘maybes’ that the offer seemed to be more of a token gesture, than anything else. Furthermore, the rhetoric from China was very much in keeping with that heard in recent weeks, so doesn’t really move the needle very much. Still, I guess it shows how desperate participants are to jump on any kind of good news right now
• Remarks from Fed Chair Powell did little to help risk appetite, with Powell sticking resolutely to his familiar script, noting that policy is “well positioned” to wait for additional clarity for the time being, while further stressing that the Fed remain “obligated” to keep inflation expectations anchored. Frankly, there’s little else that Powell can do right now besides doing what the rest of us are all doing – sitting on the sidelines, waiting for a more concrete outlook to emerge, and hedging our bets in the meantime
• Gold remains the only real haven right now, with the yellow metal continuing to make the most of its salad days, clearing $3,300/oz for the first time ever yesterday. Momentum clearly remains with the bulls, with this being a wave that I remain content to ride, especially with demand for assets which provide shelter from political incoherence and trade uncertainty only likely to grow, as the 90 day tariff pause rolls on, with little sign of deals being made
• In the FX complex, the shaky risk tone saw continued gains for the haven JPY and CHF, and another round of sizeable USD selling, against all G10 peers. Once again, the buck is anything but a haven right now, being the currency most exposed to the whims of President Trump, and the ever-shifting nature of trade policy. I still like the buck lower, as headwinds mount and the general ‘sell US’ vibe persists, though we’ve come a long way, in a short space of time, and could be due something of a pause in the downside momentum
• Amid all of that, it’s at least reassuring that Treasuries traded as they ‘should’, advancing across the curve, led by the belly. Clearly, much if not all of this was driven by haven demand and, while I think there could be further downside instore given the general lack of enthusiasm to hold US assets right now, yesterday’s move will at least allay some concerns over the dislocations seen last week.

LOOK AHEAD – Almost time for the long Easter weekend; Europe will be closed tomorrow and Monday, with the US only out tomorrow. In any case, a sizeable round of position trimming will likely take place before markets do close for the holiday.

As for today, here’s as short a summary as I can muster – the ECB will deliver a 25bp cut; the US delivers housing starts, building permits, and jobless claims, with the initial print coinciding with the April NFP survey week; and, notable earnings come from UnitedHealth, the biggest stock in the Dow, as well as Netflix after the close tonight.