German shares took in stride the week end news that D. Trump might push forward with not only tariffs on aluminum and steel but all sorts of goods from Europe. European shares were mostly driven by Germany’s leading utilities rallying after a €43bn takeover deal by Eon of renewables company Innogy. With not much else to chew and besides an initial push higher, momentum faded quickly, leaving he S&P slightly lower but the Nasdaq slightly higher for the day. Stocks were again led by a narrow group of big cap tech stocks, with the NDX 100 driving all the gains. The dollar rallied initially but ended slightly weaker in particular vs. EM, awaiting tomorrow’s US inflation and Wednesday’s retail sales data. Gold rejected a new low yesterday. What was most encouraging was the falling correlation with everything else gold has nothing to do with or should be negatively correlated starting with stocks and the dollar. This is restoring the interest of owning some gold for diversification purpose. Bitcoins hovered its recent lows. The Metrics we look at suggest excessive optimism as greed succeeded fear perhaps a little too swiftly, one month after a scary drop. Risk reversals (below their five-year averages!) and depressed put/call open interest ratios suggest dried out appetite for equity markets hedges. Despite Europe’s idiosyncratic reason to rally yesterday, Chinese markets also failed to rally overnight as China geared for industrial production, retail sales and fixed-asset investment on Wednesday which are all likely to point to slower growth. Bond yields fell slightly, CHF gained as did JPY. With synchronized growth on the wane as suggested by the Citi Economic surprise index showing divergences, we are pulling back our horns following the market runaway gains of the past few days...
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