Watching markets was like looking paint dry yesterday. After breaking the all-time record long bull market ever (technically meaning that the market spent 3,453 days without a 20% correction), US stocks sputtered, closing slightly (-0.2%) lower on holiday thinned volumes. EM markets sentiment soured one more time following a brief recovery, bowing under the weight of D. Trump’s twitter feed where he reported his ongoing interest to build a wall with Mexico, his desire to impose tariffs against European imports, a new salvo of tariffs against Chinese exports and a warning against South Africa. This latter tweet triggered a diplomatic dispute with South Africa’s government, which summoned the US ambassador to explain the president’s “unfortunate comments,” according to the country’s Department of International Relations. The tweet caused a 2% decline in the rand at some point. While the USD was on a rally mode again, EUR remained generally well supported (especially vs. GBP), supported by ECB official Jens Weidmann saying it's time for the bank "to begin exiting the very expansionary monetary policy and the non-standard measures, especially considering their possible side effects." The intention to end bond purchases in December is "just a first step," he added, though other policy tools will probably change "only gradually over the next few years. On the data front, US new home sales dropped for a second month with actual (not speculative) July sales down 17%, and since March down at a 55% annual rate, according to D. Rosenberg which underscored the recent Fed concerns highlighted in July meeting’s Fed minutes on the housing market. So far, 14 economic indicators for August missed expectations and only 5 beat with 3 matching expectations which should at least invite some caution on the perma bull US economic discourse. D. Rosenberg also noted that what was most striking about the FOMC minutes published on Wednesday was what they started with -- the eventual return to zero rates and how this situation “could become more frequent and protracted than in the past."… A possible explanation (beyond the mega large short base) for the US bond market resilience. Fed Chair J. Powell will address a forum of central bankers at Jackson hole today for which M. Draghi (no ECB executive board member was announced) and BoJ Governor H. Kuroda skipped attendance. J. Powel is still expected to signal two more rate hikes this year and next. In response to recent interference of D. Trump on Fed policy, Kansas City President Esther George said Trump's criticism of the central bank won't influence monetary policy, and that she in favor of two more hikes in 2018 as well. 10Y US Treasuries traded around 2.83% and oil was little changed while Gold (snapshot) dropped USD7 as the dollar was generally stronger.

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