S&P equity futures followed Asian and European stocks lower, driven by weakness in Franch and Italian markets, as French political concerns returned; the pound tumbled after UK monthly retail sales unexpectedly dropped pushing the dollar higher and Euro lower.
The global "risk on" melt-up continues.
After a modestly hawkish Yellen warned that every meeting is live, and refused to take March off the table, sending the dollar and yield higher and the S&P to fresh record highs, world stocks rose hitting a 21-month high on Wednesday with the dollar rising for the 11th straight day, the longest positive streak since July 2015.
European, Asian stocks declined, halting a global rally that sent U.S. stocks surging to new all time highs faltered, weighing on the S&P although the index rebounded modestly after a kneejerk announcement lower overnight after Trump's National Security Advisor announced his unexpected resignation.
As noted this morning, there are three drivers to today's action: i) last week's Trump promise of "phenomenal" tax cuts, ii) tomorrow's Janet Yellen testimony before Congress in which she is expected to sound hawkish, and iii) the overnight end of China's reverse repo drought which injected CNY100 billion in liquidity in the banking system after a 6 week pause. It is these three that prompted a return with a vengeance to the "Trump Trade" euphoria, which as RBC's Charlie McElliggott writes in his intraday note, is why the "reflation trade is back with a vengeance."
The key economic releases this week are CPI, retail sales, and industrial production on Wednesday. In addition, there are several scheduled speaking engagements from Fed officials this week, including Chair Yellen’s semi-annual Monetary Policy Report to Congress on Tuesday and Wednesday (Humphrey-Hawkins).