PERHAPS PERHAPS PERHAPS! The market reacts to Mueller jury

Markets reacted today in a somewhat muted fashion to the news released late in the afternoon by the Wall Street Journal that Mueller had impaneled a jury. In other words the investigation into the meddling of the U.S. election by perhaps the Russians and collusion between Trump’s team and the Russians has just intensified.

And in the light of all things Trump yet another leak against Trump. In some ways I feel sorry for the man. But in other ways the man has to learn that the U.S. Government won’t be run as a family business and that in diplomacy braggadocio does not work. Within the leaks today there is reference to the conversation between the now embattled Australian Prime Minister Mr Trumble (as Sean Spicer liked to call Mr Turnbull) and Trump and how the conversation with Malcolm was the toughest because Malcolm would not back down on the refugee agreement reached with the Obama Administration.

The stories about the meeting that were presented as fake news, apparently is truth. So where to from here? Certainly Trump needs to understand that he needs to take more care with diplomacy and better understand his allies. Trump’s team also find themselves under fire over comments relating to the poem on the Statue of Liberty, and that’s another story completely.

Equity markets weakened on the news of the Jury and bonds finally saw some movement. Generally, bonds rallied across Europe and the U.S. in response to the news. The Dow was flat on the day and the S&P fell-0.22% as Amazon weighed on the equity market. Payrolls data released Friday will be important as there appears to be a widening between claims and jobs. At some point the inept policies and decisions made by the Trump Administration will cause the equity markets to revalue pricing especially as rates creep higher and valuations look more stressed. The rate increases may not necessarily come from rate hikes but rather the markets adjusting to slowing central bank activity causing bond rates to climb.

To recap:

Equities fell on the news of Mueller’s impaneled Jury. The markets fell in the last half hour or so of trading. The S&P was down 0.22%. The FTSE 100 gained 0.9% after the BOE failed to raise rates.

Currencies were mixed. The yen gained 0.7% on the day, the pound lost 0.6%.

Bonds rallied about 5 bp. The U.S 10-year rallied to 2.22% down 5bp, the curve flattened. The 2/10 closed at 87.8 in 3bp, the 2/30 closed at 145.4 in 4 bp and the 10/30 closed at 57.4 in 1 bp. Bonds do appear to be reacting to heightened political risks and it will be interesting to see how far this rally progresses. (Political uncertainty appears to be catching. Netanyahu is facing possible graft charges. Brazil has a President facing corruption charges and a number of other leaders are under investigation)

Commodities saw oil slip 0.5% with WTI trading at $49.35 a barrel. Global demand for gold fell 14% in the first half according to the World Gold Council. Nickel rallied and is up 18% and is up 18% over the last month. Much of the trading is due to arbitraging between China demand and the Philippine mining sector.