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http://trackresearch.com/articles/the-morning-track-equations/
The equations today for mining market alpha – real growth = real yields and politics = volatility. Better China industrial production but weaker retail sales make clear it’s about America first to lead global growth along. Trouble starts with policy as trade tariffs and allies confused by Trump Tweets will likely lead to less confidence that US growth helps. The seasonal noise and weaker domestic demand make China look less stable and that puts EM on weaker footing early. The correlation of EM pain and higher US rates continues with 10Y US over 3% again. Higher rates didn’t help equities today but focus for equities into the month-end will be on the MSCI benchmark and the shift to China shares. The EM world got plenty of surprises with Iraq voting for Moqtada al-Sadr – a critic of both Iran and the US, with India’s ruling party looking set to win another state Karnataka boosting Modi’s chances for the national election next year. But the most market moving s
tory overnight was from a Bloomberg interview with Turkey’s President Erdogan vowing to have more involvement with the economy and the central bank if he wins the snap elections next month. This put the TRY off another 1.5% to new record lows. The economic data deluge from Europe all mattered more than politics – Italy’s 5-Star and League want more time to settle on a Prime Minister. The UK PM May clashed over the rival plans for the Irish Border, while talk of RBS government share sale also floated. All this sent the USD further bid with EUR back below 1.19. The German GDP missed, the EU GDP was in line but clearly slowing, the German ZEW was flat while the UK jobs report was mixed with claims jumping in April but wages higher in the 1Q and the unemployment rate in line with BOE forecasts. The net effect has been to see USD bounce back from the 3 days of selling and to be the key focus as growth and politics drive markets until US retail sales.
The Morning Track equations
- The Morning Track – Equations by Bob Savagehttp://trackresearch.com/articles/the-morning-track-equations/
The equations today for mining market alpha – real growth = real yields and politics = volatility. Better China industrial production but weaker retail sales make clear it’s about America first to lead global growth along. Trouble starts with policy as trade tariffs and allies confused by Trump Tweets will likely lead to less confidence that US growth helps. The seasonal noise and weaker domestic demand make China look less stable and that puts EM on weaker footing early. The correlation of EM pain and higher US rates continues with 10Y US over 3% again. Higher rates didn’t help equities today but focus for equities into the month-end will be on the MSCI benchmark and the shift to China shares. The EM world got plenty of surprises with Iraq voting for Moqtada al-Sadr – a critic of both Iran and the US, with India’s ruling party looking set to win another state Karnataka boosting Modi’s chances for the national election next year. But the most market moving s
tory overnight was from a Bloomberg interview with Turkey’s President Erdogan vowing to have more involvement with the economy and the central bank if he wins the snap elections next month. This put the TRY off another 1.5% to new record lows. The economic data deluge from Europe all mattered more than politics – Italy’s 5-Star and League want more time to settle on a Prime Minister. The UK PM May clashed over the rival plans for the Irish Border, while talk of RBS government share sale also floated. All this sent the USD further bid with EUR back below 1.19. The German GDP missed, the EU GDP was in line but clearly slowing, the German ZEW was flat while the UK jobs report was mixed with claims jumping in April but wages higher in the 1Q and the unemployment rate in line with BOE forecasts. The net effect has been to see USD bounce back from the 3 days of selling and to be the key focus as growth and politics drive markets until US retail sales.
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Robert Savage
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