The US dollar continues its march and all other majors are falling with the yuan at new lows:
Commodity currencies were hit hard:
Gold too:
Brent sagged:
Base metals rolled, except copper, which appears the next target of Chinese speculators:
Big miners are in melt-up:
However, emerging market high yield debt just sent a major warning signal as the rampaging US dollar begins to suck the life out of the periphery:
And US bonds keep selling with higher yields on the way at the core:
With shares still running:
Herein lies the problem for a US dollar-dependent world driven by US growth. The two are actually mutually exclusive. The stronger the US gets, the more capital that will get sucked out of emerging markets and, before long their interest rates will begin to rocket, their currencies collapse, and a self-fulfilling cycle of capital flight ensue.
While commodity prices can hold up the risks are contained, but if they roll then we’re back to the Mining GFC with a bullet. Right now the lynch pin for that is not Trump stimulus, it is a band of crazy Chinese speculators that are diving a bulk commodity bubble that China itself is trying to extinguish. To call it shaky does not quite capture it somehow!
In other Q4 risk gauntlet news, Europe is warming up the next round of exits, from Reuters:
Donald Trump’s unexpected victory in the U.S. presidential election is likely to make it even harder for Italian Prime Minister Matteo Renzi to win a crucial referendum on constitutional reform set for December.
Renzi was one of the few world leaders to publicly endorse Hillary Clinton and Trump’s triumph has not only put the Italian premier in a difficult diplomatic position, it has also underlined the rise of anti-elite sentiment around the world.
“This factor is weighing against Renzi because at the moment for many Italians he represents the establishment,” said Roberto D’Alimonte, politics professor at Luiss University in Rome.
Renzi has said he will resign if he loses next month’s ballot and was already facing fierce headwinds, with all opposition parties pitted against him and almost every opinion poll over the past two months showing the ‘No’ camp ahead.
However, a large number of Italians remain undecided, helping to fuel government confidence that the ‘Yes’ vote will eventually win and stave off a renewed bout of political uncertainty that is feared by the financial markets.
“The Trump win does show that populism continues in 2016 and suggests a ‘no’ vote in the Italian referendum could be stronger than we assumed,” David Zahn, the head of European fixed income at U.S. fund manager Franklin Templeton, told Reuters.
It remains under-priced in bonds:
Then it’s on to this, via the FT:
Donald Trump’s election as US president denied Hillary Clinton the prize of being the first woman in the White House but could boost the hopes of a female politician across the Atlantic: Marine Le Pen.
France is the next big western democracy due to elect its president and a win for the far-right National Front leader in May’s election would cause a political earthquake in Europe to rival Mr Trump’s victory this week.
Like the US president-elect Ms Le Pen is seeking to appeal to voter concerns over immigration and globalisation, blaming the establishment and the media for France’s economic and social woes.
“This election should be interpreted as the victory of freedom,” Ms Le Pen said on Wednesday of Mr Trump’s win. “Let’s bet that it will give another reason for the French, who cherish freedom so much, to break with a system that hampers them.”
Ms Le Pen advocates radical measures including an exit from the EU, a tightening of asylum criteria and a ban on the wearing of the Islamic veil in all public places. Many of her policies would overturn France’s postwar consensus.
Political rivals and commentators agree that her chances of victory have improved after Mr Trump’s win. Five months after Britain’s vote to leave the EU, they say the Republican’s successful campaign is likely to fuel support for Ms Le Pen’s anti-immigration and anti-EU platform.
“The probability of Marine Le Pen’s election has increased with Brexit and now Trump’s election because they are giving more credibility to the radical, populist vote,” says Dominique Reynie, head of FondaPol, a centre-right political think-tank. “They create precedents that will remove the mental barriers of voting for Ms Le Pen. Voters will say: ‘After all, others have done it and the world has not collapsed.’”
Donald Trump has not reduced risk, he’s increased it.
