EUR 8.70 For Business Accounts Only

The Morning Track bomb-cyclone

- The Morning Track – Bomb Cyclone by Bob Savage
http://trackresearch.com/articles/the-morning-track-bomb-cyclone/

On watch to see how weather matters to markets as other stories remain less important. The US “bomb cyclone” weather event on the East Coast is big, delivering a messy storm with lots of snow as the sudden drop in atmospheric pressure explodes with warm air meeting cold mixing with the rotation of the earth to create a hurricane like storm what New Englanders know as “Nor’Easters,” but that isn’t as scary or descriptive of the pain delivered. The release of some US economic data – like weekly claims is likely to be delayed today because of the storm. There were other bangs last night. The 3% rise in the Nikkei merits attention, this was a bang rather than fizzle to start 2018 in Japan. The shift from 68% to 76% chance for a Fed March rate hike is a bang for an otherwise dull market in US rates. This reflects the ongoing better growth story with 3-3.5% GDP in 1Q penciled in along with the slightly more hawkish FOMC minutes. The bang surprise today, is in
the fizzle of the USD, weaker against commodity currencies, the EUR and GBP, while only modestly gaining on the JPY. The economic data from global Service PMI reports is a bang – with a few notable points – that input prices are higher almost everywhere but output prices aren’t – suggesting a profit margin squeeze is ongoing for corporates. This balances against better growth with Europe 4Q seen at 0.8% q/q, UK at 0.5% q/q and Japan at 0.3%. The US Service ISM comes Friday and its just not clear what 4Q brings as many see it 3-3.5% but for the weather effects. Markets today are likely to be watching for the real bomb cyclone effects on trading with fears that the bull run in equities that has started the week fizzles should rates drag past 2.54% in 10Y. That maybe the risk but the reward is in holding the course and staying warm.