James Brodie
Head of Learning & Development, Flux
Risk Reverses on Warsh News, Software Stocks, Canadian Tarrifs
Risk-off as hawkish Warsh tipped for Fed Chair: dollar rallies, yields up, gold/crypto slide, stocks fall, Canadian tariffs
Risk is reversing hard on the news Kevin Warsh, the most hawkish candidate, will likely be announced today as the new Fed Chair by Donald Trump (Polymarket jumped to 88%).
The erodes the whole dollar debasement story and would restore Fed independence and credibility eroded in the Trump-Powell saga. Gold down -5.5%, Silver down -10.8% (nearing critical stops below $100.00 which could break today), Platinum down -10.8%, Palladium down -9.1%, Nasdaq futures down -1%, Brent down -1.9%, Bitcoin (he is a Bitcoin sceptic) down -2.6% breaking below key $84,600 support, while the curve steepens with 30-year yields up 5bp and edging towards 5%, and the dollar rallies 1.2% from its Tuesday lows.
Also supporting the dollar - Senate Democrats say they have reached a deal with President Trump to fund the government and avoid a government shutdown.
Panama's Supreme Court ruled that a Hong Kong company's contract to run the ports at both ends of the Panama Canal is unconstitutional, advancing Trump's "Donroe Doctrine" to block any influence by China over the strategic waterway — AP The Donroe Doctrine is a modern reinterpretation of the Monroe Doctrine, emphasizing U.S. dominance in the Western Hemisphere under the Trump administration.
Microsoft fell another 10% yesterday over its surging AI spending (Microsoft removed as top pick at Morgan Stanley!!). Now down 22% from its August peak. While Amazon in talks to invest up to $50b in OpenAI: WSJ.
U.S. November trade deficit widens to -$56.8 billion (est. -$43.4b; prev. -$29.2b), biggest m/m increase since 1992.
President Trump imposes a 50% tariff on any aircraft sold by Canada to the United States.
Gold yesterday posted an intraday market swing of $5.5 trillion, three times the market cap of Bitcoin, with volatility above 2008 levels. Meanwhile a market player was bidding $3.50 for a $4,200 put in gold which has 26 days to expiry. Shows you the level of vol.
Americans are worried about their jobs: The perceived probability for households to find a new position in 3 months after a job loss is down to 43.1%, the lowest on record. The difference between strong GDP and weak consumer confidence.
Software stocks are sliding as investors worry that AI could disrupt business models faster than expected, especially after Microsoft reported slowing cloud growth and issued cautious guidance. Shares of German software giant SAP fell as much as 17%, while Microsoft, Workday and ServiceNow plunged >10%. (Chart, Bloomberg)
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