EUR 8.50 For Business Accounts Only

The Morning Track boomtown-rats

- The Morning Track – Boomtown Rats by Bob Savage
http://track.com/articles/the-morning-track-boomtown-rats/

Consolidation. The trend of low rates, high equities, low inflation, high growth – that was what we all left markets on Friday with wrapped up tight with hope and greed as the bows. We start Monday with deleveraging talk from China – as PBOC Zhou warns on corporate debt, FOMC Chair Yellen admitting inflation is a surprise but she wants to hike anyway, albeit cautiously, and with the usual set of global problems from North Korea to Syria. The rise of oil and metals overnight highlights the reflation not deflation trade and US bonds are responding even as Europe isn’t as they listened to ECB Draghi and stick to the plan. Oil is also higher because the Kurds are now fighting the Iraqis – as the battle against ISIS nears the end, the enemy of my enemy no longer needs to be my friend. The dislike of Mondays in markets starts with their mania – as they frequently depart from the trend. The silicon chips trading all markets are flipping and the trends look more like
noise and mean reversion today. The news is light as well – with China PPI higher than expected but CPI in line – leaving the PBOC comments as more a signal of the 19th Party Congress pressure than much else. 7% GDP talk for 2H2017 flows from China and that drives commodities and EM as well. In Europe, trade surplus and higher German wholesale prices matter less than the Catalan independence push and how the EU treats the UK on the way out. Character is defined by how you treat people on the way down rather than on the way up. So maybe the EUR waffle here is more about expansion doubts and morality than rates and growth. Gold is higher along with the bitcoin and that adds to the confusion over how reflation and higher equities can coexist with a fervent dislike of fiat currencies – blame that on the ECB as well with their linking of EUR levels to rate policy normalization this weekend problematic. Yet another reason not to like Mondays.