The announcement from Trump that the US will place a 5% tariff (to climb steadily to 25%) on all Mexican imports if Mexico doesn’t take action to “reduce or eliminate the number of illegal aliens” crossing into the US roiled markets last night. Global equities sold off with the NIKKEI down 1.6%, the SCI was off 0.2% (hurt also by weaker Chinese PMI), European markets fell from 1.2% to 1.6%, and S&P futures tumbled 1.2%. Investors flocked to the safe havens, with the yen rallying to a 4-month high (109.62 – 108.71), and global bond yields – which were already plumbing near many month lows in recent sessions - fell further (Japan’s 10-year from -0.07% to -0.099% - near 3-year low, Germany’s 10 year from -0.176% to -0.213% - record low, UK’s 10-year from 0.904% to 0.854% - near 3-year low, and the US 10-year from 2.217% to 2.149% - fresh 20-month low). Gold spiked higher as it touched off buy stops over $1289 (double top - 5/17 and 5/30 highs), $1295 (down trendline from 2/20 $1347 high) and $1297 (100-day moving average) to reach $1299 where resistance there from the 5/16 high and ahead of $1300 (psychological and options level) capped the advance. Gold was also aided from a decline in the US dollar (DX from 98.17 – 97.95), which was hurt by the yen strength along with a bounce in the euro ($1.1126 - $1.1157, shrugs off weaker Italian GDP and German Retail Sales).
At 8:30 AM, stronger than expected readings on US Personal Income (0.5% vs. exp. 0.3%) and Personal Spending (0.3% vs. exp. 0.2%) lifted S&P futures (-27 to 2762) and took the US 10-year bond yield up to 2.178%. The DX had a modest bounce to 98.06, and gold pulled back to...