EUR 8.46 For Business Accounts Only

The Morning Track catalysts

- The Morning Track – Catalysts by Bob Savage
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The chemical reaction of negative news headlines mixed with the usual worries about global growth, US rate policy and trade wars drive global pessimism towards most risk assets again. The day of mourning yesterday provided no new timed reflection for buying the dip and the rest of the world responds. Markets are in a lab experiment with recognition that the beaker for a Santa Claus rally appears to be broken. The arrest of the Huawei CFO in Canada for breaking US Iran sanctions, the BOJ Kuroda warnings on economic risks ahead, the failure of OPEC to get a deal before its meeting driving oil down over 4% and UK PM May’s ongoing search for a compromise to save her government and the Brexit deal, Italy’s League appears unwilling to shift the 2019 budget deficit below 2.2% while the 5-Star coalition might agree to 2.1% but neither seem sufficient to appease the EU budget rules – all these headlines take the blame for the new-found energy to sell after Tuesday’s collap
se. The elixir to save risk will require a new mixture of a dovish Fed which requires stronger US data without inflation, more from Trump/Xi on their trade truce leading to a real deal, some solution that keeps the UK government together with some Brexit respite, and more evidence that China growth has stabilized. The catalysts for today’s selling are well known, the risks for a surprise bounce seem discounted away. The most interesting story in the price action isn’t in stocks, bonds or commodities but the lack of interest in FX. The JPY and its crosses should be on high alert for a bigger panic move for safety. The fact that 112 holds for now looks encouraging and perhaps suggests that the chemical reactions of ugly headlines and negative sentiment on positions may be nearing the end of the bear experiment into US data and the all-important US jobs report tomorrow.