While volatility and uncertainty persisted over the first half of last week, US stocks recovered with a powerful relief rally on Thursday and Friday that led to small gains for the week on the combination of revamped expectations for a partial mini trade deal with China and as the Fed announced on Friday, earlier than expected (instead of at the Fed end of month meeting or even in November) a “non” QE monetary easing aimed at clearing the clogs in US money markets tubing. The dollar weakened; European stocks outperformed, supported by confidence that a Brexit deal could finally be in the cards. EM markets also outperformed, supported by some recovery in commodities (and risk appetite) but bonds sold off despite the Fed’s actions. Over the past week, the S&P500 gained 0,7% (18,5% YTD) while the Nasdaq100 rose 1,2% (23,9% YTD). The US small cap index gained 0,7% (12,2% YTD). CBOE Volatility Index sold off by -8,6% (-38,7% YTD) to 15,58. The Eurostoxx50 rallied 3,6% (21,5%), outperforming the S&P500 by 2,9%, supported by strength in European banks. EUFN (ISHARES MSCI EUROPE FINANCIA) rallied 5,3% (5,8%) or their entire performance for the year (ex. juicy dividends). Diversified EM equities (VWO) gained 1,5% (7,8%), outperforming the S&P500 by 0,9%. CSI300 Chinese equity index (ASHR) continued to outperform, climbing 3,7% (28,4%), taking in stride D. Trump’s efforts to prevent US sourced buying of Chinese assets. Indian shares (EPI) dropped -0,4% (-6,3%). Russian shares (RSX) gained 1,8% (22,2%). The Dollar DXY Index (UUP) dropped -0,5% (5,4%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,4% (0,4%). The euro rose across the board last week except vs. GBP with EURGBP dropping -1,9% (-2,8%, Z-score -2,4) as hopes of a Brexit deal resurfaced on Thursday). EURUSD otherwise gained 0,5% (-3,8%); EURCHF recouped 0,7% (-2,2%) and EURJPY rallied 1,8% (-5,0%). USDCNY dropped -0,8% (3,1%). USDBRL gained 1,3% (5,9%). USDRUB dropped -0,7% (-7,4%). USDMXN dropped -1,0% (-1,7%). According to the BIS triennial Survey published last week, the daily turnover in interest and FX derivatives rose from USD11.3trn in April 2016 to USD18.9trn in April 2019. 10Y US Treasuries sold off with yields rising 20bps (-96bps) to 1,73%. The US yield curve turned positive again for the first time since July. 10Y Bunds climbed 14bps (-68bps, Z-score 2,2) to -0,44%. 10Y Italian BTPs sold off as well, adding 11bps (-180bps) to 0,94%, outperforming Bunds by -3bps. Credit markets rallied with US High Yield (HY) Average Spread over Treasuries dropping -29bps (-136bps) to 3,90% and the worst credit of the US High Yield (HY) Caa Average Spread over Treasuries dropped -20bps as well (-60bps) to 9,29%. US Investment Grade Average OAS dropped -6bps (-45bps) to 1,27%. In European credit markets, EUR 5Y Senior Financial Spread dropped -6bps (-48bps) to 0,62%. EMLC (VANECK JPM EM LOCAL CCY BOND) gained 0,6% (2,1%, Z-score 2,1), as investors were attracted to foreign high yields as core bond markets sold off. On the heels of last week’s “risk on” episode, Gold dropped -1,0% (16,1%) while Silver dropped -0,2% (13,0%). Major Gold Mines (GDX) sold off by -3,2% (27,9%). Bitcoin gained 1,1% (124,9%). In the meantime, China announced it added 100tons of gold to its reserves year to date, reinforcing its standing as one of the largest official purchasers of gold. Goldman Sachs Commodity Index rallied 2,7% (8,4%). WTI Crude rallied 3,6% (20,5%). CPER rallied 2,5% (0,2%). Over the week end… · Turkey is facing fresh sanctions as its campaign against Kurds of Syria drew criticism. Germany and France said they would stop selling weapons to the country for now. Trump warned of new sanctions, should Turkey go “off limits” with no clarity on what limits and trigger are or would be. · Markets are opening higher this morning with D. Trump with the S&P +9 points as Trump pushed back against some of the scepticism about phase 1 of the US/China partial trade deal agreed with China which will freeze the new wave of tariffs that would have been enacted on October 15th (but not yet those planned for December 15th). The two Presidents will come together in two weeks. · Chia’s Xi said that any attempt to divide China will be crushed. · Trade numbers from China are due out later today, seen dropping -2.8% yoy (from -1% in August) as a result of the trade war. Imports are expected to drop -6% (from -5.6% in August). Inflation are due out on Tuesday · Ten Fed speakers are due to speak this week. 

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