EUR 8.46 For Business Accounts Only

The Morning Track dealing

- The Morning Track – Dealing by Bob Savage
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The house always wins. The deal hopes are driving the bourses globally higher with equities back in favor after 3-days of S&P500 gains. Yet, markets are fickle like a drunken card player. Taking another card on 16 seems to be the risk on the day. There is plenty behind this drinking binge with China deal hopes high – even though intellectual property and forced technology transfers remain hot issues. The CNY trades at 3 ½ month highs even as China bond yields drop further. The recent RRR cut and the fiscal pump priming helped shares there as well. But the reasons for the China actions beyond trade are significant and they matter. The economic data overnight was gloomy at best – Australia services PMI dropped faster and harder, housing there is worse, while German trade showed less demand, French consumer confidence plummets, and UK productivity flips negative in 3Q. Markets are bid for risk nevertheless as this is about positions and fear of missing out in the 2019
rush to play. There is little room for bad news on the tape going forward which makes the agenda today important with BOC policy decisions likely on hold but with a hawkish tinge, with Fed speakers and FOMC minutes reminding everyone of the December hike and risk for another in 2019, with 10-year US bond sale pointedly making clear higher equities makes lower bond yields less attractive. Rates maybe the one area to watch for risk today as the rally up in shares hasn’t yet been confirmed by fixed income – particularly in Europe. The rate spread arguments for the USD demise are also less obvious and nowhere more clearly than in China. The near 7.0 highs of CNY in November risk a 6.7350 test on trade hopes. Dealing the cards for the next hand makes clear that such stability in CNY maybe less helpful a card for the PBOC and other officials as they struggle to see better 2019 growth.