Monday started off where Friday left off, with the global reflation/stagflation trade in full swing as the dollar surge continues, pushing the DXY above 100 for the first time since December, global bond yields soaring, emerging market currencies tumbling, and the Yuan slammed below 6.85 for the first time. However, where Monday is different is that while European stocks and US index futures started off far higher, E-minis have now faded the entire overnight rally and are now red for the session, on concerns that the spike in yields will cap any more stock upside.

The Bloomberg Dollar Spot Index jumped 0.7 percent, rising for a fourth-straight day, and set for the largest gain over such a period since 2009.

As the dollar surges, emerging markets are getting crushed again and the MSCI Emerging Markets Currency Index slid 0.2 percent, extending last week’s 2.27 percent drop, the deepest five-day loss since June 2013. The lira and Hungarian forint tumbled more than 0.9 percent.

However, while market cheerleaders will point to the imminent new all time highs in the DJIA, it is the rout in bond markets that is the real story as both UK 10Y gilts, Spanish 10Y and Italian 10Y bonds all plunging by the biggest intraday amount in almost a year. As Bloomberg notes, the  global bond rout is intensifying, sending U.S. 30-year yields above 3 percent for the first time since January, and the 2-year yield above 1% for the first time since January on speculation that inflation will quicken as Donald Trump tries to increase spending to boost the world’s largest economy.

“Yields will continue to rise over the next year,” said Hiroki Shimazu, an economist and strategist at the Japanese unit of MCP Asset Management in Tokyo. “The fundamentals are very strong, particularly in the U.S. There are some signs of higher inflation pressures. Trump is pushing this phenomenon.”

Benchmark German 10-year bonds headed for their longest losing streak since May, and those on similar-maturity Italian debt climbed to the highest since July 2015. U.K. 10-year gilts extended their slide to a sixth day, pushing yields to a five-month high. Portuguese yields rose above 3.6 percent for the first time since October. Since the Nov. 8 election, developing-nation local-currency bonds tumbled 7.3 percent through Nov. 11, the biggest three-day slump since October 2008. The decline cut the bonds’ return this year to 8.5 percent.

Thirty-year bond yields climbed six basis points, or 0.06 percentage point, to 3.00 percent as of 10:08 a.m. in London, and earlier touched 3.03 percent, based on Bloomberg Bond Trader data. The 2.875 percent security due in November 2046 fell 1 3/32, or $10.94 per $1,000 face amount, to 97 21/32.

Government bonds also extended losses across the Asia-Pacific region. Thailand’s 10-year yield jumped by the most since May after foreign investors pulled a record 27 billion baht ($763 million) from the nation’s bond market on Friday, while similar-maturity debt in China dropped for a seventh day, the longest losing streak in three years.

“Trump has introduced so much uncertainty — around the fiscal outlook, the outlook for foreign demand for Treasuries given his protectionism and his views on China, uncertainty around the outlook for the Fed,” said John Davies, an interest-rate strategist at Standard Chartered Plc in London, which adjusted its forecast for 10-year Treasuries yields to 3 percent in the end of 2017 from below 2 percent previously. “There’s an uncertainty premium, rather than just expectations of much more Fed tightening,” being priced into Treasuries, he said. “We think there’s room for this to continue.”

U.S. 10-year note yields jumped seven basis points to 2.23 percent.  The selloff wiped a record $1.2 trillion off the value of bonds around the world last week when Trump was elected U.S. president. Investors rotated into stocks, as global developed-market shares beat investment-grade debt by the most since 2011 amid concern the stimulus will stoke inflation and lead the Federal Reserve to raise interest rates. Pacific Investment Management Co. said the central bank may move three times by the end of 2017.

“Yields will continue to rise over the next year,” said Hiroki Shimazu, an economist and strategist at the Japanese unit of MCP Asset Management in Tokyo. “The fundamentals are very strong, particularly in the U.S. There are some signs of higher inflation pressures. Trump is pushing this phenomenon.”

The move marks a reversal from four months ago when benchmark Treasury yields fell to a record low of 1.318 percent. “Long-term interest rates seem to be bottoming out,” Pimco, which runs the world’s biggest actively managed bond fund, said in a post on Twitter Nov. 11.

As Goldman and Deutsche Bank both warned on Friday, keep an eye on yields: while it is unclear what the level is, with GS expecting around 2.50% while DB suggesting “somewhere around here”, the US 10 Year will soon reach that level which makes further equity gains impossible due to both concerns imminent Fed rate hikes will tighten financial conditions, while growing fears that inflation will sap corporate profits will likely also result in equity selling in the near future.

“In the short-term the election of Donald Trump as president is causing a bit of uncertainty and markets tend to overreact to that,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about $121 billion. “I suspect the dust will settle down in the next couple of months and this sort of market overreaction will provide opportunities.”

S&P 500 Index futures were down modestly, wiping out a gain of as much as 0.5%,  The Stoxx Europe 600 Index is likewise fading its early gains of 0.9%, after rallying last week by the most since July. The Index was supported by advances in miners and banks, seen as beneficiaries of Trump’s policies, with merger-and-acquisition activity also providing a fillip. Among the deals being discussed:

• Siemens AG climbed 1.7 percent after agreeing to buy Mentor Graphics Corp. for $4.5 billion to expand its industrial software capabilities.
• Intrum Justitia AB jumped 12 percent after Europe’s biggest debt collector said it is acquiring competitor Lindorff in a $1.96 billion deal.
• Harman International Industries Inc. agreed to be acquired by Samsung Electronics Co.
• Novartis AG was little changed after people familiar with the matter said the Swiss health-care company is in talks to acquire U.S. generic-drugs maker Amneal Pharmaceuticals LLC.

Meanwhile, with the Dow Jones flirting with all time highs again, the MSCI Emerging Markets Index fell 0.9 percent, headed for its lowest close since July 8.

* * *

Bulletin Headline Summary from RanSquawk

• European equities trade higher across the board with financials once again leading the way higher with markets eyeing Trump’s latest key appointments
• USD strength continues to be the main theme of FX markets with the USD-index breaking above 100.00 to the upside
• Looking ahead, highlights include ECB’s Draghi, Praet, Fed’s Kaplan, Lacker and Williams

Market Snapshot

• S&P 500 futures up 0.4% to 2169
• Stoxx 600 up 0.9% to 341
• FTSE 100 up 1% to 6800
• DAX up 1% to 10770
• German 10Yr yield up 5bps to 0.36%
• Italian 10Yr yield up 12bps to 2.14%
• Spanish 10Yr yield up 12bps to 1.59%
• S&P GSCI Index up less than 0.1% to 351.5
• MSCI Asia Pacific down 0.5% to 135
• Nikkei 225 up 1.7% to 17673
• Hang Seng down 1.4% to 22222
• Shanghai Composite up 0.4% to 3210
• S&P/ASX 200 down 0.5% to 5346
• US 10-yr yield up 7bps to 2.22%
• Dollar Index up 0.73% to 99.78
• WTI Crude futures down 0.3% to $43.27
• Brent Futures down 0.1% to $44.69
• Gold spot down less than 0.1% to $1,227
• Silver spot down 0.1% to $17.35

Global Headline News

• Samsung to Buy Harman for $8 Billion Cash in Automotive Push: Harman gets more than 65% of sales from automotive sector
• Siemens Buys Software Maker Mentor Graphics for $4.5 Billion: Deal is Siemens’s biggest since Dresser-Rand two years ago as it seeks to expand in industrial software
• Priebus Named Trump’s Chief of Staff, Bannon as Strategist: Twin appointments are an attempt to balance the alternative right, represented by Stephen Bannon, with the establishment Republican Party, represented by Reince Priebus
• Trump’s Infrastructure Plan to Cost $1t, Scaramucci Writes in FT
• Trump Says May Deport Up to 3 Million Undocumented Immigrants
• Novartis Said to Hold Talks to Buy Generics Maker Amneal: Amneal could be valued at as much as $8 billion in a sale
• China Economy Holds Ground Amid Curbs to Cool Housing Market: Industrial production, fixed-asset investment remain resilient
• Trudeau Clears Path for Canada to Approve Kinder Morgan Pipeline: Green measures give PM political cover for Dec. 19 decision
• ‘Dr. Strange’ Beats 3 New Releases to Hold Box-Office Lead

* * *

Looking at regional markets, we start in Asia where stocks traded mixed following a similar close last Friday on Wall St, where post-election gains lost steam amid weakness across the energy complex, in which both WTI and Brent crude futures declined by over USD 1.00/bbl. Nikkei 225 (+1.7%) outperformed amid JPY weakness and a firm Q3 GDP release. ASX 200 (-0.6%) closed in the red as energy and mining sectors weighed on the index after gold extended on Friday’s USD 30/oz slump. Hang Seng (-1.4%) conformed to the downbeat market conditions following gains in HK money market rates and disappointing Chinese data in which New Yuan Loans, Aggregate Financing, Industrial Production and Retail Sales all missed expectations, while Shanghai Comp (+0.5%) was underpinned from a firm liquidity injection by the PBoC. Elsewhere, a story in the WSJ that President-elect Trump chose Republican National Committee Chair Reince Priebus as White House Chief of Staff has led US equity futures higher with Mini Dow Jones trading higher by nearly 100 points, as some have suggested that this move by Trump is positive and hinted of a more conventional approach. 10yr JGBs extended on Friday’s lows amid the advances seen in Japanese stocks, while a firm GDP release also dampened hopes for BoJ action. Japanese GDP (Q3 P) Q/Q 0.5% vs. Exp. 0.2% (Prey. 0.2%); Annualized Y/Y 2.2% vs. Exp. 0.9% (Prey. 0.7%).
Chinese Industrial Production (Oct) Y/Y 6.1% vs. Exp. 6.2% (Prey. 6.1%); YTD 6.0% vs. Exp. 6.1% (Prey. 6.0%). Chinese Retail Sales (Oct) Y/Y 10.0% vs. Exp. 10.7% (Prey. 10.7%); YTD 10.3% vs. Exp. 10.4% (Prey. 10.4%).

Top Asian News

• Exports Drive Japan’s Economy to Unexpectedly Strong Growth: Net exports, or shipments less imports, added 0.5 ppt to GDP
• Hong Kong Said to Plan to Allow Leveraged ETFs of Local Stocks: Regulator plans to approve local indexes in 2017 after review
• Mizuho Profit Beats Estimates as Tax Gain Offsets Loan Slump: 2Q net 225.5b yen vs est. 182.2b yen
• Alibaba Wants Its $18 Billion Singles’ Day to Be More, Mean Less: Company has been downplaying gross merchandise volume metric
• PLDT to Complete December Refinancing Facilities for 2017 Debt: $470m of committed refinancing already signed

In Europe, the risk on sentiment has seen equities spend the morning in the green (DAX: +1.1%), with financials outperforming as has been the case since the Trump transition team confirmed that the president elect remains keen to repeal Dodd Frank Act. Outperformance in financials has been exacerbated by the latest merger talk, with Ansa noting source reports of a potential merger between Unicredit (+2.5%) and SocGen (+1.9%), although both companies have refused to comment on any rumours. Finally, fixed income markets have continued to see pressure as with T-notes running in to sellers amid reports of 1480 block trade sell order overnight, keeping the price around the lows. Bunds opened below the psychological 160.00 level to head into mid-morning lower by 60 ticks. The periphery has seen the 10Y PGB/Bono spread widen this morning as EU’s Moscovici reiterated that they are waiting for a new draft for the Spanish budget, in order to confirm to 2017 deficit targets, with reports suggesting PM Rajoy could call a snap election if congress were to refuse to pass his budget.

Top European News

• EU Offers Trump Cooperation While Signaling Policy Firmness: Europe draws red lines on climate, Iran, Russia positions
• Brexit Threatens to Ignite European Skirmishes Over EU Budget: Focus on 12.8 billion euros of spending shifts in 2017-2020
• Brexit Costs U.K. $82 Billion in Lost Company Spending: Study shows more than 40% of U.K. businesses have delayed or canceled investments since the vote to leave the European Union
• CME Said to Consider Dublin Clearing Options Amid Brexit Fallout: Exchange’s European clearinghouse considers links in Ireland as part of effort to maintain access to European Union customers

In currencies, the Bloomberg Dollar Spot Index jumped 0.7 percent, rising for a fourth-straight day, and set for the largest gain over such a period since 2009. The euro fell versus the greenback for a sixth day, its longest run of declines in six months, dropping 0.9 percent to $1.0760, a level last seen in January. The yen sank 1.2 percent and touched its weakest level since early June. Japan’s economy expanded by an annualized 2.2 percent in the last quarter, data showed Monday, exceeding the 0.8 percent expansion forecast in a Bloomberg survey and easing pressure on the Bank of Japan to add stimulus.“The dollar is strengthening along with the rise in U.S. yields, reflecting expectations for economic expansion from fiscal spending,” said Yunosuke Ikeda, Nomura Holdings Inc.’s head of Japan foreign-exchange research in Tokyo. “Japan’s 2 percent growth can be used as a reason for the BOJ not lowering interest rates for a while.” The pound fell 0.7 percent to $1.2514, wiping out a 0.6 percent gain last week. The Swiss franc advanced to the strongest level since June 24 against the euro. New Zealand’s dollar dropped to a one-month low after an earthquake rocked the country early Monday. South Korea’s won dropped to its weakest level since June amid growing calls for President Park Geun-hye to be impeached over an influence-peddling scandal, while China’s yuan slid to a six-year low. Mexico’s peso fluctuated after a Trump adviser hinted in a Financial Times opinion piece that the president-elect is open to negotiations before imposing import barriers. It tumbled 12 percent in the three days following the election of Trump, who had campaigned on promises to tear up the North American Free Trade Agreement, crack down on illegal immigration, and build a wall along the southern U.S. border.

In commodities, copper rallied as much as 3.4 percent in London. It surged 11 percent last week as Trump pledged to spend more than $500 billion rebuilding U.S. infrastructure and Chinese investors stepped up purchases. All base metals except tin advanced on the London Metal Exchange. Iron ore climbed to a two-year high on the Dalian Commodity Exchange as data showed rising steel output in China, the world’s largest steelmaker. Goldman Sachs Group Inc. said the initial reaction of iron ore and copper prices to the infrastructure spending proposed by Trump has been excessive and analysts reiterated their view for sequentially lower prices. Gold touched a five-month low, after sliding last week by the most in three years as the prospect of Fed rate increases strengthened the dollar. Oil slipped 0.4 percent as Iran boosted output and as U.S. explorers raised the number of active rigs to the most since February, signaling the persistence of a global supply glut.

On today’s US economic calendar there is little of note, however there will be a lot of Fed speakers with Kaplan, Lacker and Williams all speaking later today.

DB’s Jim Reid completes the overnight event wrap

If you’re feeling irritable, depressed, with aggressive tendencies this morning it might have nothing to do with the events of last week. Instead it could be today’s ‘super’ supermoon which adorns the night sky and brings our satellite 31,068 miles closer to us than it’s furthest point in its orbit to what will be the shortest distance away from earth since 1948. If you feel the urge to howl like a werewolf try to hold it in until the moon starts retreating tomorrow or risk blowing your cover.

This week will really all be about President-elect Trump’s public comments and also those of his Republican party. The market is this morning reacting to Trump’s appearance on CBS’s 60 minutes program last night and also the significant early personnel appointments within Trump’s team, also announced late last night.

With regards to the former, much is being made of the fact that Trump said he may be willing to compromise and leave certain parts of the existing Affordable Care Act as is, when he starts on his own initiative, and so indicating a slight softening on his initial views that Obamacare would be repealed. Unsurprisingly the TV interview also had a big focus on Trump’s immigration plans. The President-elect confirmed his intentions to deport or jail up to 3 million undocumented immigrants who had a criminal record but at the same time ‘make a determination’ on the remaining 8 to 9 million undocumented immigrants whom he also called ‘terrific people’. There was also a focus on financial regulation which he intends to make an urgent priority, reiterating that the Dodd-Frank Act will be ripped up or made smaller to allow ‘banks to lend again’.

That other important news to highlight this morning is the announcement of the key appointment of Reince Preibus, the chairman of the Republican National Committee, as Trump’s chief of staff. Campaign chairman, Stephen Bannon, has also been appointed as Trump’s chief strategist and senior counsellor. The suggestion is that the appointment of Preibus in particular will be seen as a somewhat market-friendly outcome, given his strong ties with Paul Ryan. He is also the candidate most likely seen as co-operating with Congress and promoting strong ties in Washington, alongside having a softer stance on certain policy matters. As the Washington Post made mention to, the ‘choice signals Trump’s willingness to work within the very establishment he assailed on the campaign trail’. The appointment of Bannon on the other hand is, as the BBC aptly presents, Trump ‘keeping an outsider devil on his shoulder’. It’ll be interesting then to see how the balance between the two appointments plays out in reality.

Staying with this subject, tomorrow the House Republican Conference will hold its closed door leadership election. The chatter is that Speaker Paul Ryan will hold onto his current post following the clean sweep by the Republicans after there had been some question marks in the run up to the election. Tomorrow Ryan will need a majority of only-elected and new Republicans to be nominated, before then facing a vote by the full House in early January where a majority is needed.
So as we refresh our screens this morning it’s been a broadly mixed start across Asia, although bourses have also had some important economic data releases to contend with. In Japan the Nikkei is +1.58%, helped by a better than expected Q3 GDP print for the country (+0.5% qoq vs. +0.3% expected) which was boosted by a bounce in net exports. In China the Shanghai Comp is +0.35% following more mixed data there. Industrial production in October was unchanged at 6.1% yoy but missed relative to the 6.2% consensus, while retail sales softened from 10.7% to 10.0% yoy (vs. 10.7% expected). There was better news with the fixed asset investment data however, where investment rose one-tenth to 8.3% yoy (vs. 8.2% expected). It’s worth also noting that the PBoC fixed the trading band for the renminbi at its weakest level since September 2009 this morning, following the recent bounce for the Greenback. Meanwhile, the Hang Seng (-1.17%), Kospi (-0.22%) and ASX (-0.80%) are all in the red, although US equity futures are up about +0.40%. Having been closed on Friday, 10y Treasury yields are up 4.6bps at 2.196% and Gold (-0.66%) has continued to weaken.

Moving on. We will soon all be focused on the upcoming Italian Senate reform which would have been a big deal even without a Trump victory but has now got even greater focus. DB’s Marco Stringa has upped his probability of a rejection to 60% from 55% previously. He also has just published a joint note with our fixed income and equity strategists which looks at every scenario imaginable in the weeks and months after the vote in 3 weeks. Marco still feels that even with a rejection being his central-case scenario, there is unlikely to be an immediate general election but a muddle-through government formed with limited scope and limited duration. Even a victory for Renzi might only postpone the risk (not remove it) of the worst case scenario for markets of a 5SM Government/coalition, a non-binding referendum on Euro membership and an ‘out’ vote (remember the Brexit referendum is technically non-binding too). The note puts the probability of this 3 stage worse case scenario somewhere between 2-15% depending on the different outcomes. If you love flow charts and scenario analysis then this is the research report for you. When thinking of these probabilities our take is to remember that in the middle of 2015 some were suggesting the probability of Trump winning the Republican nomination alone were around 1% and his probability of being President 150-1 at a similar time. So we live in unpredictable times. Thankfully my job isn’t to make predictions…. oh hang on it is!!

Another note that we want to highlight for readers this morning comes from our HouseView team. In light of the Election result, they have published a report entitled “A potential game changer”. They note that despite criticism of some of Trump’s policies, they could provide a material boost for growth and, in return, for risk assets, if they are implemented well. The team highlights that he has pledged a large fiscal stimulus, ambitious tax cuts and reduced regulation. The fiscal plan would represent the first tangible shift away from the policy mix that has prevailed since the crisis — very accommodative monetary policy compensating for tight fiscal policy — and that many investors have been hoping for this over the last year. At the same time the team also note that there is a risk that these policies will not be fully implemented, especially given that Trump’s fiscal plans could lead to a larger deficit than Congress will allow. This means that policy uncertainty will prevail for the time being. Moreover, not all of Trump’s proposals are positive. The biggest threat to growth is a possible protectionist turn, which could depress global trade and even trigger trade wars. A further risk is that Trump’s successes result in political spillovers to the upcoming elections in Europe by strengthening the fringes of the political spectrum.

Back to markets and quickly reviewing Friday which, following an exhausting week and despite a US holiday, was still a turbulent day for bond markets. It was the periphery which really suffered with 10y BTP’s finishing +12.2bps higher in yield and closing above 2% (2.018% to be exact) for the first time since July 2015. The post election move for BTP’s is just shy of +27bps higher, while Spain and Portugal were +8.4bps and +8.7bps higher in yield on Friday respectively taking the post election move to around +20bps. 10y Bunds finished at 0.305% on Friday and a little over 3bps higher on the day (10.5bps since the election) but still the highest yield since March this year. The pain in EM continued meanwhile. 10y local currency Mexican bonds were +17.9bps higher in yield on Friday and over +100bps higher post election. In FX there were losses of greater than 1% on Friday for the likes of the Mexican Peso, South African Rand, Chilean Peso and Argentine Peso while equity markets in Mexico (-0.54%), Brazil (-3.30%), Chile (-1.51%) and Colombia (-1.55%) were sold in tow.

That compared to a smaller -0.14% loss for the S&P 500 although the Dow did close +0.21% and extended its record highs. The wide dislocation across sectors is dominating still though. Industrials gained again on Friday while the S&P 500 banks index rose +0.40% and took its post election gain to an impressive +9.8%. Energy stocks were weak on both sides of the pond however with WTI plummeting -2.80% to close below $44/bbl as OPEC supply concerns remain elevated. It was the moves across the metals complex which really stood out on Friday though. Gold plummeted -2.51% and so capped the worst week (-5.93%) for the precious metal since June 2013. The intraday high to low range for Gold last week was actually a fairly incredible 8.83%. Meanwhile, Silver plummeted -6.68% on Friday and across base metals Copper (-1.65%) finally weakened for amazingly the first time in 3 weeks. Other base metals also weakened with the exception of Iron ore which rallied +7.68% to take its weekly gain to nearly +23% with the China credit stimulus story in full flow.

Away from the market moves, datawise it was another fairly quiet day. The preliminary University of Michigan consumer sentiment survey appeared positive at first glance with the November headline consumer confidence reading rising 4.4pts to 91.6 (vs. 87.9 expected) with both the current conditions and expectations components up, but it was noted that the survey period covered October 28th through to election day so we’ll have to wait for further revisions to get the full impact from the result. That said, inflation expectations also moved up encouragingly while Fed Vice-Chair Fischer also highlighted on Friday that in his view the Fed is moving closer to achieving both the inflation and employment components of its dual mandate and so ‘accordingly, the case for removing accommodation gradually is quite strong, keeping in mind that the future is uncertain and that monetary policy is not on a preset course’.

Turning over to the week ahead now. In terms of data, it’s a very quiet start to the week today with the only data this morning in Europe being the industrial production report for the Euro area. There’s nothing due out in the US this afternoon. We kick off tomorrow morning in Germany where the preliminary Q3 GDP report will be released. Shortly after that we get CPI in France and the full inflation data dump in the UK. Thereafter we get Q3 GDP for the Euro area and the November ZEW survey out of Germany. We’ve got important data in the US tomorrow too with October retail sales, September business inventories, November empire manufacturing and also the October import price index. Turning to Wednesday, the early data comes from the UK again with the September and October employment report. It’s another busy session in the US on Wednesday with October PPI, industrial and manufacturing production and also the NAHB housing market index print for this month. We kick off Thursday in France again where we’ll get Q3 employment numbers. Thereafter the UK reports October retail sales data before we get the final October CPI revisions for the Euro area. Over in the US on Thursday the big focus will be on the October CPI report, while housing starts, building permits, initial jobless claims and the Philly Fed PMI round off another busy day. Friday morning it’s the turn of China where the October property prices data will be out. Over in Europe the only data of note is the PPI report in Germany while in the US we finish the week with the leading index and Kansas City Fed manufacturing survey.

Away from the data, it’s an absolutely packed week for Fedspeak. Today we have Kaplan, Lacker and Williams all speaking tonight. Tomorrow we have Rosengren, Tarullo, Fischer and Kaplan all speaking from midday. On Wednesday it’s the turns of Bullard, Kashkari and Harker. Thursday is the big one with Fed Chair Yellen testifying before the Joint Economic Committee, while Brainard will also speak. On Friday we’ve also got Bullard, George and Kaplan on the cards. Meanwhile, over at the ECB we will hear from President Draghi today when he attends an event in Rome. With it also being Euro Finance week there is a steady stream of speakers throughout the week in Frankfurt. This year’s conference is called “Brexit, Banking, Bubbles – Chances and Risks in the New Normal”. If that wasn’t enough, in the UK BoE Governor Carney is scheduled to testify before Parliament on Tuesday. The other event to note is the scheduled meeting between President-elect Trump and Japanese PM Abe on Thursday.

Gold is now down over 10% from pre-Trump highs (to 9-month lows). USDJPY has jumped back above 107.00 (to 4-month highs), extending its move to a stunning 6 handles since Trump’s victory lows. After being closed on Friday, Treasuries have opened notably lower (with 10Y yield up over 5bps, breaking above 2.20%) and US equity futures extend gains with Dow up over 80 points.

China weakness Yuan again…

• *PBOC SETS YUAN FIXING AT WEAKEST SINCE SEPT. 2009

Gold is now down over $120 from pre-Trump highs, looking set to retest $1200…

Gold near 9-month lows…

USDJPY spiked above 107.00 stops…

Leaving Yen at its weakest in 4 months to the dollar..

Dow Futures are now up almost 1500 points from Trump lows…

Sparking more selling in Treasuries… pushing 10Y yields above 2.20% for the first time since Jan 8th…

“The US election will help all those who have not had the courage to come out and say ‘I will vote No’,” proclaimed one of Italian PM Renzi’s opponents as The FT reports the centre-left prime minister’s referendum on change is threatened by the global populist wave. Even before the US election, he faced a struggle to secure victory in the referendum, with most polls tilting in favor of voting ‘No’, albeit with many undecided voters, but opponents claim “many undecided voters in the polling booth will say ‘No No No’, just like Trump voters.”

As The FT reports, Mr Renzi has said he will resign if his flagship changes to Italy’s political system are rejected in a referendum on December 4, making him a casualty of the populist insurgency sweeping western democracies and increasing investor concern for the eurozone’s third-largest economy.

That fear is most evident in Italian sovereign bonds which have collapsed dramatically in the last weeks (accelerating in the last few days) with 10Y BTP yields above 2.00% for the first time since July 2015 and the spread to Bunds at its highest in 2 years (despite collossal buying from the ECB)…

Mr Trump’s win has further encouraged those in the No camp, which is dominated by anti-establishment parties that have questioned Italy’s membership of the eurozone and Nato, and pushed for a crackdown on migrants.

In an interview with newspaper Corriere della Sera at the weekend, Silvio Berlusconi, the media tycoon and former prime minister who is often compared to Mr Trump, said the “same spirit of rejection” that drove the US election would “induce” Italians to vote No in the referendum.

Beppe Grillo, the comedian who leads the Five Star Movement, an anti-establishment party running neck and neck with Mr Renzi’s Democratic party in national polls, praised Mr Trump’s victory as the triumph of “failures and misfits” against an intellectual elite. “Those who dare, the stubborn, the barbarians will carry the world forward, and we are the barbarians,” Mr Grillo added.

Mr Renzi has rejected any comparisons between the referendum and Mr Trump’s win, or the UK’s in June to leave the EU.“These are profoundly different elections in different countries,” he said via social media after Mr Trump’s win.

But lawmakers and officials from Mr Renzi’s ruling Democratic party suggest he must now do more to emphasise his reformist credentials, by pointing out that the constitutional changes would break the mould of Italy’s traditional political system while a No vote would enshrine the status quo.

“We are not the establishment, we are a new political class,” Graziano Delrio, the transport minister, has said.

In addition, Mr Renzi and his allies may try to use the vote for Mr Trump to highlight the danger that a No vote could give more momentum to populist parties, which many moderate Italian voters fear, particularly if it were to trigger turmoil in financial markets.

“The American example will be proof to Italian voters that dissatisfaction and rage can take two paths: either protectionism and isolation, like Trump and Brexit, or reforms, which this government is carrying forward,” said Andrea Romano, a Democratic party lawmaker close to Mr Renzi.

The challenge for Mr Renzi posed by the US election result is compounded by the fact that it has also energised leftwing dissidents within his party, who are also campaigning against the constitutional changes.

Both Pier Luigi Bersani, the former party secretary, and Massimo D’Alema, the former prime minister, have depicted the US election as a defeat for the moderate centre-left politics that Mr Renzi has embodied.

And as if more evidence of the growing concerns over Italy’s future were needed, Italy’s TARGET2 balance just hit a record high (these balances, or rather imbalances, reflect the direction of the capital flight… and there is only one direction as is very clear from the chart below: from Southern Europe into Germany.) As we noted previously, positions within the Target2 system, which settles cross-border payments in the euro zone, are monitored because in a world where all other market signals are corrupt and distorted by central banks, they remain a reliable, concurent indicator of financial stress, for example when banks in a country lose foreign funding. Which is why we were surprised to learn that in the latest monthly update, Bank of Italy’s liabilities toward other eurozone nation soared by over €60 billion in the last two months to a new record high,of €355 billion, notably surpassing the previous records set in 2012, just prior to Draghi’s infamous “whatever it takes” speech.

What makes the surge in liabilties particularly notable is that Italy continues to sport a healthy current account surplus, suggesting the source of the outflows is likely found inside Italy’s banking sector. In July, the Bank of Italy said that the recent increase in its Target 2 position was driven by foreigners selling Italian assets, especially bonds, and Italians buying foreign assets, movements which were only partially offset by Italian banks raising more funds on international markets. In August this trend picked up dramatically, prompting questions just how dire is the true state of Italy’s banks, behind the shiny and cheerful facade presented on a daily day by Matteo Renzi, and whether this has anything to do with the recent decision by Milan prosecutors to end the probe for market manipulation, false accounting and corruption by insolvent Monte Paschi’s CEO and former chairman which “risked undermining investor sentiment.”

And now most recently we see capital flight accelerating as the refendum looms and is increasingly signaling “Italeave” is on the cards.