Global markets were rocked in the early hours of Wednesday after President Donald Trump unleashed a flurry of sometimes mixed Twitter posts.
US stocks plummeted on Tuesday, while Treasuries rose after Trump tweeted that he had decided to do so. stop stimulus interviews. His posts during Asian time on Wednesday – calling for support for airlines and the salary protection program – helped erase losses in US stock and Japanese stock futures. Most Asian currencies slid lower due to uncertainty over the next round of US stimulus. In total, Trump tweeted or retweeted just under 40 times over the span of two hours.
Trump sets fire to Twitter against many of his usual suspects
This is increasing market volatility, which has already increased this month after Trump tested positive for the coronavirus as investors grapple with the existing uncertainty surrounding the US election and a stimulus deal. A measure of implied volatility on one-month Treasury options jumped nearly 18 percentage points on October 6, the largest daily increase since March 12, when the market was rocked by rising coronavirus cases.
“Assuming Trump doesn’t reverse his stance on the fiscal stimulus package, we think the remaining hopes of reviving the risky reflation trade could be silenced for now,” said Terence Wu, a currency strategist in Singapore at Overseas-Chinese. Banking Corp., warning investors to “stay agile on changing political winds”.
While the US Treasury market’s sensitivity to Trump’s tweets peaked in May in the midst of the Covid-19 pandemic, his Twitter activity still significantly influences expectations of market volatility. analysis by analysts from JPMorgan Chase & Co. who created the Volfefe Index showed last month.
– With the assistance of Dani Burger
(Updates with implied volatility on one-month Treasury options in the third paragraph)