EUR 9.38 For Business Accounts Only

The Morning Track finality

- The Morning Track – Finality by Bob Savage
http://track.com/articles/the-morning-track-finality/

If you think elections solve uncertainty, then have a drink and enjoy the surety of voting in the US. Unless you are drunk, this won’t solve the volatility problem of politics or of policy. This isn’t the final act of liberal democracy. Markets are too sanguine about risk-on and risk-off as the make up of a national US election is likely to reflect the themes and clearly uncivil behaviors of the campaigns. What seems most obvious about the US process is that civil discourse has dropped considerably and that the news media no longer is seen as an unbiased fact-checker but rather a tool to affirm already set opinions. The US electorate isn’t listening and the US voter is angry – those are the two take-aways. What does that mean for US markets – more trouble not less in the weeks ahead. Sure we will get the usual post-election relief rally. Sure, the make up of the US House and Senate matter more than the Presidency but no, the risk of the US rate divergence un
winding the world into 2017 continues. Overnight there were notable releases that are import to life after the US vote:
o China Oct Trade Surplus was $49.06bn – with exports missing -7.3% y/y
o German Sep Industrial Production missed at -1.8% m/m
o UK Sep Industrial Production missed at -0.4% m/m
All point to weaker growth than was priced by the upbeat PMI stories and highlight the confusion over trade, finance and what higher rates will mean to the world. The most obvious point about the data overnight is that the role of the US to China is key and that of the EU is continuing to weaken. The US is nearly 20% of China exports while the EU is now 15%. That spread matters.

For trading markets today, the risk-on and off mood continues on the hope of certainty – but that hasn’t yet extended into larger moves in JPY or EUR. The world is watching the USD to see if the election produces the simple result of more buying – with FOMC and government policy all part of a difficult picture with a downward bias clearly in play.