Stock markets, particularly in the US have been looking exhausted lately. Having reached the end of the seasonally strongest time of the year for stocks, and entering a historically more volatile period, it's been clear it wouldn't take much to collapse this house of cards.
US index futures, the Dax, and the Nikkei are all down about 0.5%. Gold , silver and the Japanese yen, meanwhile are roaring back to life with the precious metals posting 1% gains. Meanwhile EUR and GBP also continue to climb. The FTSE is the top performing major index, holding steady on support from a very strong UK employment report.
A clear shift in capital looks underway with traders pulling money out of risk markets in general and the US in particular. Growing political turmoil in the US, increasing tensions in Asia, and easing uncertainty in Europe (for now) have a lot of traders rewthinking their political risk exposure.
In the US, the latest claims from former director Comey accusing President Trump of asking him to drop the investigation of former National Security Adviser Mike Flynn has ratcheted up political tensions even further. Whether any of the recent controversy and accusations will actually amount to anything remains uncertain.
What is clear, however, is that all of this sound and fury has created a toxic environment in Washington, making co-operation between the parties pretty much impossible. It also distracts the President away from his reform agenda potentially causing delays and changes.
Even if all of the current controversy blows over somehow, another set of storm clouds is brewing. There have been reports that NAFTA renegotiations could start in August, creating trade uncertainty. The potential need for the President to score a big win on something just ahead of a big budget battle and a likely government shutdown in September-October could make for tough talks.
Speaking of offshore issues, apparently the US aircraft carrier Ronald Reagan has left port in Japan while tensions with North Korea continue to rise. A few weeks ago its would have been laughable to suggest that Europe would become the most stable region, but it shows how fast things can sometimes change in politics.
Resource markets are also under pressure today. Australia's index outpaced its peers to the downside falling 1.0%. Resource currencies like CAD and AUD have been falling off a cliff even underperforming the nosediving USD. Crude oil has been steady overnight but with API having reported a 0.9 mmbbl increase in oil stockpiles and traders expecting a 2.6 mmbbl decrease in the DOE report, oil could be volatile through the day today.