It was a solid day all around the globe which was a little surprising given most markets backed away from yesterday’s gains late in the day. China’s data was marginal given what had been expected, but the positive momentum, strong oil, and a reviving commodity sector made everything feels sunny again. The Nikkei has recovered well from the Golden Week route with today’s market rallying over 2%. The Hang Seng and Shanghai both closed in positive territory around 0.3% higher on the day. In late US trading, HSI is up an additional 0.5%, while China and the Nikkei futures have added an additional 1%+.

European indices got off to a healthy start with the DAX up around 1% but tailed a little into the close finishing +0.65% higher. Munich re-cut its full-year profits guidance and that was one of the reason dealers provided, but overall the markets made steady progress with many quoting oil as a primary reason for confidence returning. CAC, FTSE and IBEX were also all positive but the peripherals did rather better (Athens, ASX, closed up over 3.2% on news of additional debt relief). CAC, although positive, did underperform its peers as Natixis reported a 30% decline in (YoY) Q1’16 which sent its shares down over 7% today.

Oil was up over 3% by the time the US cash markets opened and all core indices were off to an impressive start to the session there were great expectations in early trade. However, we eventually settled for a lull in volume and prices around midday but all was forgotten as we headed into the close. The Dow closed up over 225 points; we saw 1.25% gains for both the NASDAQ and the broader S&P also. A weaker JPY (now trading with a 109 handle) and a stronger DXY (last seen 94.25) were all reasons provided for the stronger markets.

With all the euphoria of a stock market rally, we saw interesting price action in the fixed-income markets. The short end lost its bid, all be it in quiet trading, while the long end continued to perform. The 2/10 curve closed tonight at +103bp – with 10’s closing unchanged at 1.75%. There was a similar curve movement within the Bund curve where 10’s outperformed 2’s. 10yr Bund closed 0.125%; closing the US/Germany 10yr at 162.5bp. Italy 10yr closed 1.51% (+5bp), Greece 7.48% (-59bp obviously performed because of the helping hand), Turkey 9.81% (+12bp), Portugal 3.31% (+5bp) and UK Gilt 10yr at 1.40%.

Still on the agenda for this week, we have the Bank of England rate decision and Eurozone GDP on Thursday, and US Retail Sales and CPI expected on Friday.

Private Update for Precious Metals

We have issued a special report for the Euro & the US Dollar Index.

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Well, all the fools who believe in climate change/global warming will be ecstatic to know that they can help the planet through the new proposal from the United Nations and World Bank. These wonderful entities are now forecasting a shortage of water in places like the Middle East by 2050. The solution will be simple: they will tax the rest of us and raise the price of water so that we can “conserve” to help other counties from running out of water.

I really do not understand how raising taxes on water in the USA could help to preserve water in the Middle East — but hey, what do I know? What I do know is that Al Gore said New York would be under water by now because the ice caps were melting. That has not happened, yet now there will be a shortage of water? Does that imply that the ice caps grew larger? This is very confusing and the analysis is rather stupid. They assume whatever trend is in motion will remain in motion; so if the stock market rises today, well it will rise every day forever. Strange analysis.

While many are slamming Trump for suggesting that the U.S. buy back its debt for less than face value, the truth is that he is at least talking about the issue.

When criticized by George Stephanopoulous, Trump responded, “You never know. At some point, they [China] might want to get out. Maybe they need their money, they might wanna get out.” It is amazing that people in government and mainstream media see no problem with borrowing year after year without ever paying off the debt.

Why do we borrow if we do not expect to ever pay off the debt? That is a question no one asks. Instead of criticizing Trump, they should bring this issue forward and actually explore why we borrow more every year.

Donald Trump named Chris Christie, the New Jersey governor, to lead his transition team as reported by the FT. This is rather important. No doubt, Christie would take the position of Attorney General should Trump win. But the real critical aspect here is that Christie was the ONLY candidate to tell the truth about Social Security. Christie told the people that the government “stole” their Social Security funds. Of course he is correct. Social Security goes negative next year by the government’s own forecast. This means that Trump, given his recent comments about renegotiating the national debt, demonstrates there is a discussion behind the curtain albeit nobody wants to raise that issue just yet.

There is little doubt that Hillary is one step away from being implicated in the Panama Papers in the same manner as Putin. Why has the press not put Hillary in the headlines? I think we all know the answer to that; they have already crowned her president. The lack of integrity to treat Hillary the same as Putin illustrates the bias of the press. We should never forget that the Spanish American War was instigated by false media coverage simply to sell papers. Yes, the man they named the Pulitzer Prize after because he made so much money with fake news reports is honored among journalists. I suppose that would be like the liquor industry celebrating Al Capone. The failure to use the very same standard they applied to Putin with Hillary illustrates the lack of integrity once again that will go down in history – yellow journalism.

Hillary and Bill have multiple connections with people who have used the besieged law firm Mossack Fonseca to establish offshore entities. The Clinton’s buddies involved in the Panama Papers scandal include Gabrielle Fialkoff, the finance director for Hillary’s first campaign to run the U.S. Senate. This is the same situation as Putin’s “aid,” but Fialkoff was saved from such headlines. Then there is Frank Giustra, a Canadian mining guy who travels the world with Bill. Let us not forget the Chagoury family who pledged $1 billion in projects to the Clinton Global Initiative. Remember the Chinese billionaire Ng Lap Seng who was at the center of a Democratic fund-raising scandal when Bill Clinton was president? Of course, there was the late billionaire investor Marc Rich, an international fugitive for tax evasion, who Bill Clinton gave a presidential pardon.

The Clintons themselves do not appear to be in Mossack Fonseca’s database or at least the journalists are protecting them for now. Their daughter, Chelsea, and her hedge fund manager husband Marc Mezvinsky have not been sited either. Clearly, the way the journalists spun this story against Putin for having an aid with such connections leaves us guessing about the integrity of the press who has avoided the same connection with Hillary. Of course, the Telegraph reported Putin’s comments on Hillary: “It’s better not to argue with women.” She is widely hailed by the press because they want a woman president just as they wanted a black president with Obama. It is always about what they want. It seems yellow journalism is alive and well.

China’s trade balance (released overnight) was not great (Est. $40bn but the actual release was $45.56bn and exports contracted 1.8% in April) and had a negative effect on equities from the open. The Nikkei and Hang Seng were heavily influenced by oil’s rally given the very sad news of the Alberta fire incident. Japan and Hong Kong rallied with core indices closing up 0.68% and 0.25% respectively.

Oil was still the main talking point when European equity markets opened, but after a slow start the markets moved ahead. Session highs were seen (as oil turned lower) just after lunch, but it was downhill from there for the markets that were still open. DAX closed up 1.1%, CAC up 0.5%, and then FTSE was down on the day at -0.2%. Energy and Miners were the big draw on the UK market but there was more publicity from David Cameron (UK Prime Minister) announcing that BREXIT could endanger peace, which certainly has the markets guessing. FTSE MIB (Italian Exchange) is worth a mention this evening as it suffered closing down almost 1% because of the continued weakness in banking stocks.

U.S. stocks have seen a fairly quiet start to the week as the majority of the moves were seen prior to the U.S. open. Oil did open strong earlier in the day but lost all of its gains ahead of the U.S. open. European stocks also retraced all of their gains. By the close, they forgot about earlier trading and began focusing on tonight’s China CPI and PPI data expectations. CPI is expected tonight at 2.4% and PPI -3.8%.

DXY closed this evening above 94 at 94.15, +0.3% on the day. The U.S. dollar made major ground against the JPY and the Russian rouble (+1.2% a piece), +0.8% against the AUD, and +0.5% against the Canadian dollar. Many emerging market currencies lost ground as continued uncertainty from political to natural disasters surrounded many markets and unnerved growth.

The safe-haven bid today was again the fixed-income markets on both sides of the water. The U.S. Treasury market saw good demand across the curve with 2-10’s all falling 3bp but did see 30s lag that move a little (-1bp). 10s closed this evening at 1.75% whilst over in Europe the German 10yr Bund closed at 0.125%; closing the spread at +162.5bp. 10yr Italy closed 1.46% (-3bp) and rumor has it that Italy is to launch a new 50yr issue, Greece 8.07% (-9bp), Turkey 9.69% (+6bp), Portugal 3.26% (-3bp), and UK Gilt 10yr at 1.41% (+0).

A special report on the fate of the dollar and the euro is now available.

This 61-page report provides the long-term view for the dollar and euro going into 2020. Since this key element is central to all other markets, this is a very important report.

All reports are delivered via e-mail within 3-5 business days.

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