Week In Review – October 12

Summary

• Ugly week for equities
• Russell 2000 led the U.S. indices down, falling over 5 percent
• Shanghai down over 7 percent,  some of which was catch up after a week close
• The 10-year yield rise, which triggered the equity correction,  stabilized peaking at 3.25 percent
• U.S. credit starting to crack with lower tier spreads blowing out.  As we said last week,  watch this space!
• EM FX a bit stronger led by Turkey with release of America pastor
• Crude oil gave 4 percent back
• Lumber =  Timber!  Now down almost 50 percent from its spring peak

Commentary:  Equities cracked as bonds cracked.  Watch the levels in following table.  Angel Merkel’s coalition party took a beating in the Bavarian elections calling into question of the stability of the German government.  Unclear of impact on euro, but bet it’s not a positive.  All eyes on Frankfurt elections in two weeks.  Looking for bounces to get shorty.

Watch Europe on back of Merkel’s trouncing in the Bavarian elections

Economic gains continue to accrue to capital over labor

Saudi stocks hammered over tensions of the Washington Post’s journalist’s suspected murder