Over the past week, the S&P500 dropped -0,3% (24,4% YTD) while the Nasdaq100 dropped -0,5% (30,8% YTD). Technology stocks are now still racing toward their best year in a decade... XBI (SPDR S&P BIOTECH ETF) rallied 4,0% (22,8%, Z-score 2,0). The US small cap index dropped -0,4% (18,2% YTD). The Eurostoxx50 dropped -0,7% (25,5%), underperforming the S&P500 by-0,4%. Diversified EM equities (VWO) dropped -0,1% (10,8%). ASHR (XTRACKERS HARVEST CSI 300 CH) dropped -1,8% (26,2%). Russian shares (RSX) dropped -0,4% (31,4%). China’s central bank cut its short-term lending rate for the first time in four years on Monday (by 5bps), signalling the start of a new easing cycle as Beijing became increasingly concerned over slowing economic growth. “Chinese President Xi Jinping also said Friday that Beijing wants to work for a trade deal with the United States but is not afraid to ‘fight back’ to protect its own interests. In other words, China indeed needs a deal and will likely welcome the “a minima” phase 1 deal. Not everybody remained bullish on the prospect for a (whatever) deal. Former Secretary of State Henry Kissinger said the U.S. and China were in the ‘foothills of a Cold War,’ and warned that the conflict could be worse than World War I if left to run unconstrained. The Dollar DXY Index (UUP) rose 0,4% (5,7%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,2% (1,1%). The fundamental growth story was supported last week by U.S. homebuilding rebounding in October and permits for future home construction jumping to a 12-year high. US home sales also increased more than expected in October and house prices rose at the fastest pace in more than two years amid lower mortgage rates and a shortage of properties for sale, the FT reported. The euro was mixed. EURUSD dropped -0,5% (-3,9%). EURCHF gained 0,4% (-2,3%). EURJPY dropped -0,5% (-4,8%). 10Y US Treasuries rallied -6bps (-91bps) to 1,77%. 10Y Bunds dropped -3bps (-60bps) to -0,36%. 10Y Italian BTPs dropped -5bps (-156bps) to 1,18%, outperforming Bunds by 3bps. Credit markets were the distinct negative last week as US High Yield (HY) Average Spread over Treasuries climbed 12bps (-135bps) to 3,91% (while US Treasury yields declined) with almost 40% of the US’s biggest junk bond ETFs available for borrowing now on loan to short sellers. Such short selling is not really a bearish sign however. US Investment Grade Average OAS climbed 1bp (-54bps) to 1,18%. The worst performance in the credit space came again from US High Yield (HY) Caa which saw their credit spread climb 83bps (11bps) to 10,00%. In October, despite US stocks soaring to records and high-yield bonds posting a fifth consecutive monthly gain, the pools of leveraged loans suffered with prices on double-B CLOs tumbling to their lowest in more than three years. Whatever happens with their asset buying program, Central Banks will likely never have appetite for those securities which will have to get back on their feet on their own. The S&P5000 grind higher likely continued on FOMO, TINA and repressive monetary policies. The credit story received no support last week from the political crisis in Lebanon which sent local bonds reeling. Gold dropped -0,4% (14,0%) while Silver dropped -0,3% (9,7%). Major Gold Mines (GDX) were unchanged on the week (26,9%). Bitcoin sold off by -14,3% (91,7%, Z-score -2,8). Goldman Sachs Commodity Index gained 0,8% (10,5%). WTI Crude gained 0,1% (27,2%). Over the week end… M. Bloomberg officially entered Presidential the race (likely as much to defeat E. Warren than D. Trump). Novartis agreed to buy Medicines Co. for an equity value of about $6.8bn and a 45% premium to Friday’s closing price, snapping up a promising cholesterol drug. B. Johnson launched the Tory manifesto, urging to go carbon neutral by 2050 and Corbyn neutral by Christmas. US futures are 0.25% higher and Japan +0.8%. China said over the weekend it will raise penalties on intellectual property violations in an effort to smooth one of the sticking points with the US. The S&P 500 Index climbed on Friday after D. Trump said he was “very close” to a trade pact with China. Adding to the increasingly comical nature of the trade deal phase 1 optimism/pessimism pendulum (itself largely a lagging indicator of the S&P500 futures contract), US/Chinese officials said there was “no phase two” trade deal on the horizon. That way they can actually guide the S&P500 to infinity with 2 steps forward 1 step backward every day of the calendar.

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