Equally story overnight for more stimulus...seems consumer focused: “President Xi Jinping vows to “fully unleash” consumption in the face of US tariffs...The Chinese leader said revitalizing consumption, expanding domestic demand and enhancing investment efficiency are on top of the country’s agenda, state-run broadcaster China Central Television reported on Monday” (BBG)
On tariffs lots of confusing headlines yday including a rumour that the US was set to delay implementation of the April 9th tariffs which led to a 5% spike in SPX future to then only be later denied and followed up with 50% ratchet in China tariffs. I think the market is now pressing/hoping for a delay to the April 9 tariffs for everyone ex China. It would be rational considering “...Scott Bessent met with Trump in Florida on Sunday, Politico reported, to urge him to emphasize striking trade deals with partners in order to reassure the markets that there is an endgame to the U.S. strategy” and the "50, 60, maybe almost 70 countries now who have approached us (to negotiate trade). So it’s going to be a busy April, May, maybe into June.” That said, the Israel meeting yday brought little forward progress and the subsequent press conference that was meant to follow was canceled. My hope for demonstrating the off ramp/ask was not quite manifested. Japan seems to be actively engaged in talks and the administration seems to be giving them first priority but its unclear whether that means tariffs go forward or are delayed. Feels like we are heading to what could be another binary risk event at the middle of the week.
Think the real story yday was the bond market. Pretty sharp reversal in yields before equity markets had a clue what was going on. Glass half full interpretation was that commds (copper up most of session) and fixed income are sniffing out a trade deal in the works reacting before equities (more likely forced selling /deleveraging was still persisting in equities). The glass half empty view is that you’ve got real supply issues. That deficits do not shrink in recessions and the trade policy means more structural inflation and term premium = much steeper curves. The focus today will be on a series of bond auctions in the US starting with the 3yr this afternoon, then 10yr tomorrow and 30yr on Thursday. Curious how foreign governments like China might feel about participating in these auctions.
Stepping back we effectively had a market crash on Monday's EU open with several well liked corporates (see RHM GY gip....they make bullets) opening down in excess of 20%. In pockets the worst case seems to be price (maybe Japan). The issue with the US is that you were so far away from valuation support it’s hard to make an argument that we should rationally recover from these levels unless you can take the recession concerns off the table. From the top down it’s tricky but from bottom up perspective our flows started to shift yday as we saw select buyers begin to step in for high quality corporates who have lost 10-30% of their market caps over the past 4 sessions. In the US flows turned much more constructive across the board after having by been heavily for sale almost continually. Think we are well overdue for the oversold bounce and whether this manifests into something more meaningful will depend upon whether the next move in tariffs ends up being delayed or we continue down a path of escalation. Watching NFIB today.
