EUR 8.70 For Business Accounts Only

The Morning Track counterfactual

- The Morning Track – Counterfactual by Bob Savage
http://trackresearch.com/articles/the-morning-track-counterfactual/

If yesterday was about rumors that China would stop buying Treasuries and that the US would kill NAFTA, today is about the counterfactuals, with China’s SAFE saying the news report on its portfolio review might have quoted a “wrong source.” The White House yesterday afternoon denied the talk from Canadian officials about the fate of NAFTA, saying talks are ongoing. The fact that Canada took the US to the WTO over anti-dumping disputes could be the real problem. Markets unwind rumors and search for facts in a world filled with counterfactuals. The start of any year is filled with the “what if” worries and yesterday brought many of them out – bond yields are going up because of China or because of the BOJ stealth bond tapering, or because of the ECB actual tapering, or perhaps because the world is quickly filling the output gap and we are in the early stage of inflation, leaving the FOMC gradualism in doubt. Markets got some facts about economics and reacted mor
e last night with Australia the first case as a rate hike there is pricing in for August. Talk about a BOJ lifting of its 10Y target to 0.25% from 0% in September continues despite the BOJ last night keeping its buying of bonds unchanged. Talk about the ECB ending its QE remains open with the ECB accounts today’s key report due at 7.30am. The US and its stronger 10Y sale yesterday will see if it’s the same for the 30Y bonds today. Throw in the PPI and you have plenty of facts to counter the worries if only they cooperate. The flip-flop in bond moods hasn’t helped equities completely and that is worth watching but the real risk barometer today is in the JPY, which needs to clear 112 to get bullish on risk again.