As the German Dax witnessed what seemed a catharsis of selling from depressed football fans that sank the Dax more than 1.5% following an early German exit from the World Cup, it became clear from the early going that US indices that have nothing to do with this (the US did not make it to the World cup this time), would not be left to follow suit...  So, a technical rebound was in order… and the S&P closed +0.6% higher with slightly higher gains for the Nasdaq.

Besides a refusal to follow European shares lower, sentiment was boosted by a rally in EM currencies, led by a 2% gain in MXN. Mexican stocks and bonds rallied and the peso posted its biggest one-day gain in more than a year amid growing conviction that the expected landslide victory for Left-leaning Andres Manuel Lopez Obrador will be better received by the market than feared and also on the expectation that the central bank will be there to respond to emerging circumstances ‪on July 1st.‬ RUB and ZAR gained 0.5% while most others added small gains as well while India remained decisively weaker (mostly on higher oil prices).

Nurturing a relief rally yesterday was also a quiet (even boring) Presidential twitter feed (it always and only turns quiet after a big equity market selloff such as the one seen on Wednesday until US markets which should be preferred to all others return for all reasons except valuation, return to fresh highs again). The dollar  was mostly unchanged vs. its G7 counterparts. The announcement that US banks had passed US stress tests (except foreign Deutsche Bank of which the news that it made it to a …confidential list of stocks watched by the Fed was made public a couple of weeks ago, accelerating DB share price underperformance) gave the sector a boost. There is no sector in the US that would not be supported by a reduction of the share count and so shortly after the publication of their stress test success, major US banks barely waited for the closing bell to announce share buyback programs, each and every one of them it seems. Goldman announced it was authorized to buy back USD6.3bn worth of shares and to raise its dividend to 85 cents from 80cents; Capital One will buy back USD1.2bn; Wells ‪Fargo‬ was authorized to buy back USD24.5bn worth of shares and to increase its dividend by 10%; JPM was authorized to buy back USD20.7bn of shares and to increase its dividend by 42%; American express was authorized to buy back USD3.4bn worth of shares and to increase its dividend by 11%. Finally, Citibank was authorized to buy back USD17.6bn of shares and to raise its dividend by 40%. The financial sector seems bound to bounce by another 1% or so which, judging from the after-market action is still a little underwhelming…reflective of as latent defiance towards the financial sector. On that count, US companies brought home only $217bn of their more than $2trn in profits overseas so far, a sign that this year's corporate spending spree on things like buybacks won’t fade any time soon.

Oil continued to rally (+1%) after Washington told its allies (and many friends) to stop all purchases of the country’s crude, while OPEC and its allies bowed to US pressure to raise output and fill the gap. In an interview last week an Oil Minister said that buyers including France’s Total SA and Royal Dutch Shell have already halted purchases. Total’s CEO Patrick Pouyanne said last month that it was unthinkable for any international company to risk being excluded from the U.S. financial system, the penalty for buying Iranian crude beyond ‪Nov. 4‬, Bloomberg reported,

Recent oil price gains and depressed EM assets gave us more reasons to buy more of our preferred oil and gas play (Russia) which benefits from a cheap currency, high yields, little or no fiscal deficit, a large trade surplus, a diversifying economy (which plans to become a world leader in non-genetically modified grain products and which is bound to reap the silk road dividends) that will gain from the unavoidable economic relinkage with Europe (which D. Trump will try to preempt or front run whichever comes first). Russia can also boast a fox minded and strategically orientated (non-bipolar) albeit imperfect leadership, a successful and superior military and last but not least rising gold reserves (built month after month at artificially depressed prices due to Western shenanigans aimed at allowing the flow of physical gold to come in smoothly to meet the inelastic strategic demand of Russia and China inter alia). It is going to be difficult to impose/renew forever sanctions against Russia and in any case most European leaders are done with the endless efforts to demonize Russia (as the President of the European Commission JC Juncker stated earlier this week). Political pressures in Europe starting with the new leadership in Italy, a disillusioned if not faltering US-French leaders’ personal friendship and right wing political forces spreading across Europe can only accelerate a virtuous circle for Russia at this stage and this is likely the reason why D. Trump will now hold a summit with V. Putin as he is bound to be overpowered on this topic amidst the tribulation and side effects of his mercurial trade stance.

Gold  prices were slightly weaker (having fallen 10 out of the last 11 days) although miners were green even as the metals were on their lows.  Gold shed 2% last week while GDX was flat, which, if history is any guide, could be the prelude to better times for gold. 

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