The kneejerk shock from this weekend’s Paris terrorism, which briefly pushed S&P futures below 2000, is now a distant memory, and has been replaced with another breathless, violent rally for the second day in a row, which has seen global stocks surge after yesterday’s lackluster performance before the S&P500 soared in afternoon trading, and this morning US equity futures launched another push higher the moment Europe opened for trading, just like a day earlier, begging the question just which central bank is pushing this scramble to buy ES futures.

As a result the E-mini is now about 10 points higher driven mostly by the ongoing collapse in the EUR and the the all-important for the carry trade, Japanese Yen, as well as a continuation of the dollar rally, whose Bloomberg Dollar Spot Index just touched a new record high on continued speculation the US economy is strong enough to weather a rate hike in one month even as corporate revenues and earnings continue to plunge.

Bottom line: Who would have thought terrorism is so good for stocks.

Here is where we currently stand:

  • S&P 500 futures up 0.4% to 2056
  • Stoxx 600 up 2.1% to 378
  • MSCI Asia Pacific up 1.1% to 132
  • Nikkei 225 up 1.2% to 19631
  • Hang Seng up 1.2% to 22264
  • Shanghai Composite down less than 0.1% to 3605
  • US 10-yr yield up less than 1bp to 2.27%
  • Dollar Index up 0.09% to 99.53
  • WTI Crude futures down less than 0.1% to $41.70
  • Brent Futures up 0.6% to $44.83
  • Gold spot down 0.2% to $1,080
  • Silver spot up less than 0.1% to $14.27

    • Perhaps no other place captures the overnight surge better than France, where the CAC40 was up well over 2% at last check.The STOXX Europe 600 gained for a second day, rising the most in almost four weeks.

    The real story, however, remains the dollar, whose ascendancy continues. As Bloomberg notes, a gauge tracking its performance against ten leading global currencies has risen to the highest on record. Hedge funds remain bullish on the greenback: along with other large speculators they’ve boosted bets of dollar gains versus eight major currencies in the last three weeks, according to data from the Commodity Futures Trading Commission. The dollar has risen against all 16 of its major peers in 2015 on expectations the Fed is close to raising interest rates.

    The jump in the dollar has been so aggressive, it has even managed to unwind yesterday’s paradoxical trade where both the greenback and oil soared at the same time, a pair trade that under normal conditions makes no sense, but these are not normal conditions. As a result after trading briefly above $42, WTI is now down 1% and sppears set to resume its drop to a 30-handle, ahead of the API inventory data today which is expected to show another build, and a Citi report noting that the US land storage “getting increasingly full” suggesting an overflow may be just a few weeks away.

    Without the energy names, which drove the yesterday rally, it may be difficult to sustain the monstrous surge observed yesterday where futures swung some 50 points higher from overnight lows.

    Looking at regional markets, European equities (Euro Stoxx: +2.0%) have traded in line with their Asian counterparts to reside firmly in the green this morning, with energy names leading the way higher after the bout of strength seen yesterday afternoon in the energy complex, with industrials also benefiting from commodity strength. In terms of stock specific news, Cable & Wireless (+6.5%) lead the way higher after being bought by Liberty Global, with Smith Group (+10.0%) also among the best performers on the back of their pre-market earnings. Of note, today sees pre-market earnings from Home Depot, Walmart and TJX.

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