Futures Suddenly Plunge Ahead Of Mnuchin's "Plunge Protection Team" Meeting

In what was a surprisingly quiet trading session following the weekend's "Powell in Turmoil" newsflow and Mnuchin's bizarre "liquidity is fine" announcement which only sparked memories of similar notices from the peak of the financial crisis, which some speculated could result in a major hit to the market in Monday's holiday-shortened session, S&P futures suddenly tumbled in a what appears to be zero liquidity just around 7 am (when we suppose some human traders walked in to their trading desks)...

... dragging all US equity futures sharply lower.

Meanwhile, gold has continued its sharp recent ascent, rising to over USD 1262/oz which is just under a 6-month high. The yellow metal is benefiting from US political uncertainty as a partial government shutdown has begun alongside continued dollar weakness.

The sudden futures plunge followed what was a mixed if quiet session in Asia, where the MSCI Asia-ex Japan index dropped 0.4%. The  ASX 200 (+0.5%) and Shanghai Comp. (+0.4%) nursed opening losses with the former aided by IT and material names amid positive comments from China’s MOFCOM over the weekend that US and China have “made new progress” on trade and IP issues. Meanwhile, trade optimism also led Mainland China higher as most sectors moved into the green with telecom, healthcare, and tech leading the gains, however, upside was capped after the PBoC’s liquidity efforts amounted to a net daily drain of CNY 140bln. Finally, Hang Seng (-0.4%) came off intra-day lows but ultimately underperformed after the Hong Kong Finance Chief stated there will be “fewer sweeteners” in the FY19/20 budget and as such, almost all sectors were in the red with hardware names leading the decline. Over in Japan, Nikkei 225 was closed as participants observe the Emperor’s day public holiday.

China's Commerce Ministry said China and the US "made new progress" on the issues of trade balance and intellectual property during a phone call between officials. Chinese Finance Ministry said tariffs on some import and export products will be adjusted from Jan 1st, 2019. China will levy temporary import tariffs on over 700 items but not levy export tariffs on 94 items including fertilizer and iron ore. China will further cut MFN tariffs on 298 IT products from July 2019 and will maintain "relatively low" import tariffs temporarily on some aircraft engines.

Asia's lukewarm optimism did not carry over into Europe, where major indices are in the red with miners and retailers among the biggest decliners in the Stoxx Europe 600 Index as several European markets are closed ahead of the festive season. Sectors are similarly in the red. In terms of notable movers, JustEat (-2.5%) are in the red as shareholder rebellion gathers momentum following two of the Co’s largest investors gave support to Cat Rock Capital, which have attacked the flawed metrics surrounding executive bonuses.

The sudden plunge came hours after Treasury Secretary Mnuchin said he called the heads of the 6 biggest banks (from Cabo) to assure liquidity conditions also attempted to assure financial markets that Federal Reserve Chairman Jerome Powell would not be ousted from the central bank following an earlier report that said Trump has repeatedly discussed removing him.  On top of that, the U.S. government shutdown now in its third day looks set to last past Christmas as negotiations between Democrats and the White House continue over Trump’s demand for border wall funding.

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