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The Morning Track hitches

- The Morning Track - Hitches by Bob Savage
http://trackresearch.com/articles/the-morning-track-hitches/

I had a dog once that had a hitch in his “get-a-along “– he walked with a limp and ran with a swagger. Hitches aren’t necessarily game changers or disabilities but inspirations to greatness. One wonders if ECB Draghi walks with a hitch today. So it goes with the present state of markets – with the North Korean demands for a US summit clearly hitches to a smoother ride in markets. Hope for a NAFTA deal ahead of deadlines from Congress also looks unlikely. The speed of change yesterday in mood was worse than the actual price action. Today, the speed of the Japan growth at -0.2% q/q in 1Q maybe more problematic. China house prices rose on the month – suggesting that even with forced deleveraging, the economy holds. The global concern about Emerging Markets isn’t going away and the rise of populist governments in Europe is adding to the hitch in risk-taking today. The article that sent markets moving in Europe was from Reuters with the new Italian government of
5-Star and the League calling for the ECB to forgive E25bn in Italian debt. The relatively modest inflation reports from Germany and the EU today helped but aren’t enough for ECB magic to calm markets. The move up in yields in Europe matters significantly and is shown in safe-havens like EUR/CHF dropping from near 1.20 to below 1.18 in the last month. Yet this isn’t yet reflected in all safe-haves – like Gold – which is still below the 200-day moving average. Nor has it really hurt the equity markets, which hold together with mixed results. So the decision to make today is whether weaker outlooks for North Korea, NAFTA, Italy and EM matter enough to derail the core earnings and Capex drivers for growth in the US or Europe. If you were only looking at Gold, you would be long USD, long S&P500 and short other safe-havens. The issue remains whether US growth is enough to help the story line with the rest of the world.