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March madness for markets continues. The analogy to US college basketball shouldn’t be ignored, its Friday and more surprises will follow. Brackets force impossible choices and generate random outcomes that even the best systematic algos find difficult to win wheter in hoops or currencies. Upsets happen. The hope going into today was the ECB/FOMC and other central bank dovishness would be the push for a rebounding growth story into 2Q. But as we see how the flash PMI reports have gone in Asia and Europe, this will be difficult. Throw the lower CPI in Japan despite higher energy costs and you get the picture of doubt. Central bankers may be pushing on a string. The problems of Brexit, US/China trade and in politics almost everywhere (Thailand, India, Spain, South Africa) all block a simple trend higher in risk and any rebound in confidence. Brexit headlines dominate EU trading still. At a pivotal European Commission summit where meetings overran dramatically, the EU of
fered the UK a two-pronged plan to extend Brexit beyond the March 29 deadline. The UK will be offered a delay until May 22, if MPs approve the deal Prime Minister Theresa May had negotiated. If not, the EU will support a shorter delay, to April 12 to formulate a new plan. Delays are better than a hard Brexit April 1 but clearly not enough to hold GBP bid if global growth sags. The US/China trade talks drag on with US Treasurer Mnuchin and USTR Lighthizer in China Mar 28-29 and Vice Premier Lui back in the US in early April. The arguments for a coordinated recovery leave it back to the US and the rebound seen yesterday in weekly jobless claims and the Philadelphia Fed manufacturing index – adds to views of divergence. This puts the US home sales and flash PMI reports in the spotlight today. In the land of the blind, the one-eyed man is king arguments follow for currencies as the USD seed no alternatives. With German Bund 10-year yields near negative and German Manufacturin
g PMI at 6 ½ year lows, growth and rate differentials are sufficient to support the buck.
The Morning Track brackets
- The Morning Track - Brackets by Bob Savage/articles/the-morning-track-brackets/
March madness for markets continues. The analogy to US college basketball shouldn’t be ignored, its Friday and more surprises will follow. Brackets force impossible choices and generate random outcomes that even the best systematic algos find difficult to win wheter in hoops or currencies. Upsets happen. The hope going into today was the ECB/FOMC and other central bank dovishness would be the push for a rebounding growth story into 2Q. But as we see how the flash PMI reports have gone in Asia and Europe, this will be difficult. Throw the lower CPI in Japan despite higher energy costs and you get the picture of doubt. Central bankers may be pushing on a string. The problems of Brexit, US/China trade and in politics almost everywhere (Thailand, India, Spain, South Africa) all block a simple trend higher in risk and any rebound in confidence. Brexit headlines dominate EU trading still. At a pivotal European Commission summit where meetings overran dramatically, the EU of
fered the UK a two-pronged plan to extend Brexit beyond the March 29 deadline. The UK will be offered a delay until May 22, if MPs approve the deal Prime Minister Theresa May had negotiated. If not, the EU will support a shorter delay, to April 12 to formulate a new plan. Delays are better than a hard Brexit April 1 but clearly not enough to hold GBP bid if global growth sags. The US/China trade talks drag on with US Treasurer Mnuchin and USTR Lighthizer in China Mar 28-29 and Vice Premier Lui back in the US in early April. The arguments for a coordinated recovery leave it back to the US and the rebound seen yesterday in weekly jobless claims and the Philadelphia Fed manufacturing index – adds to views of divergence. This puts the US home sales and flash PMI reports in the spotlight today. In the land of the blind, the one-eyed man is king arguments follow for currencies as the USD seed no alternatives. With German Bund 10-year yields near negative and German Manufacturin
g PMI at 6 ½ year lows, growth and rate differentials are sufficient to support the buck.
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Robert Savage
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