FREE

The Morning Track as-usual-2

- The Morning Track – As Usual? by Bob Savage
http://trackresearch.com/articles/the-morning-track-as-usual-2/

After a panic, a nervous calm with a shot of courage from surviving the worst. That maybe the best way for thinking about today’s price action with Asia selling stocks, Europe buying them back and with fixed income the tail of the dog wagging furiously for attention again. This is business as usual – 2018 and the return of volatility caused by politics and policy uncertainty. Italy still dominates markets with an early election now expected for July or another attempt at a populist government then an election. The Italian BTP market recovers modestly, with the 5-year and 10-year sale successful enough – there was no big risk premium paid, no risk of being shut out of markets – a business as usual story. The EUR rallies back. Risk-mood flipped from negative in Asia with the US/China tariffs back on driving down shares there and throughout the region as the turnabout in US policy threatens talks going forward. The safe havens have similarly flipped from JPY touchin
g 108.35 but bouncing back with focus on rates. The world has shrugged off the Italian contagion trade and moves on. There is no “Rexit” Rome leaving the EUR but there remains “Brexit” and the GBP suffers accordingly. The EUR doesn’t reflect any of the pain that even the French election jitters caused. This is not 2012 its 2018 and markets have learned that central bankers are the safety net but not a reliable one. That puts the expectations for rates as key to trading risk more than political analysis for now. We dive next into the US jobs report and global PMI reports dragging growth and inflation back into focus. The safe-haven reversals overnight merit attention – we were EUR traders yesterday and JPY today. If we can’t get JPY back over 109.15 watch out for a return of fear and loathing in all markets.