US MARKET WRAP – Trump’s At It Again

Risk off was once again the theme today, with US President Trump laying in to North Korea late on, as he suggested that his `fire and fury' warning to North Korea “maybe wasn't tough enough.” The US President then went on to tell North Korea to “get their act together” or it “will be in trouble like few nations have ever been.”

Some noted investors had already thrown their weight behind the case for the risk off flows that we have seen in recent sessions. Goldman Sachs technical team warned that S&P, VIX & Credit signals “suggest that a period of corrective price action has begun.” While fund manager Ray Dalio posited that “prospective risks are now rising and do not appear appropriately priced in,” as he called for investors to move 5-10% of their assets into gold as a hedge against the current risk backdrop.

The USD closed out the day on its worst levels against the EUR and JPY following soft producer price data from the US. Trumps comments of course helped, while permanent FOMC voter Bill Dudley noted that he doesn't expect inflation to reach the Fed’s 2% target in the medium term. Elsewhere, GBP gave back its early data inspired gains, and CAD lost out as a result of oil trading lower on the day. The biggest loser on the day was the NZD which took a hit on the back jawboning from RBNZ assistant governor McDermott in late Asia-Pacific trade, and analysts pushing back their calls for the RBNZ to hike rates following its latest monetary policy decision.

US equities continued to soften against the risk off backdrop, and failed to post any notable bounce, with the three major indices closing out the day at their worst levels, while utilities was the only sector to post gains. The S&P 500 closed down 1.45% at 2,438.24, the NASDAQ closed down 2.22% at 5,788.19, and the Dow closed down 0.93% at 21,844.01.

Treasuries drew a bid from the soft PPI print out of the US, and saw fresh demand following a solid 30y bond auction out of the US, and pushed back to session highs in the wake of Trump’s rhetoric. Sep’17 10y T-note futures settled at 126.18, up 7 ticks. Gold also benefitted from the risk off mantra, closing near USD 1,285, up just over USD 8 on the day.

Oil was lower as a variety of bearish factors pushed crude prices lower with WTI settling at USD 48.59/bbl, down USD 0.97. OPEC’s monthly report pointed to higher production (albeit alongside increased demand) and lower compliance among its members re: it’s production agreement, the Genscape Cushing weekly inventory data pointed to large builds, Shell’s Pernis refinery remains on schedule to restart before month end and Russia’s Gazpromneft suggested that it was feasible to resume oil production at mature oilfields after the OPEC/Non-OPEC agreement expires.

10 Aug 2017 - 21:00- Fixed IncomeBank Speaker- Source: RANsquawk