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http://trackresearch.com/articles/the-morning-track-mixology/
Some argue how you mix a drink makes all the difference to its taste. Just ask James Bond, “shaken but not stirred†about it. Others will say that if the ingredients are all their, the palate will sense it and connect. This matters for markets today as we may all be driven to drink given the hot-then-cold fears over trade, China, geopolitics and such. Equity markets bounced in Asia and followed in Europe. The fear yesterday was replaced by greed today, but we sip from the same drink. The mix tastes different. CNY weakness has been connected to JPY weakness but here is the rub – that drives risk-on signals – as JPY is the carry trade anchor. JPY breaking a long-term $ downtrend is the story for many today and its at odds with other mixed signals like copper down 15% in 3 days or oil dropping 5% yesterday. The commodity collapse and the JPY weakness don’t mix logically, and yet they taste good for those looking for risk today. Some of this is just about ZTE and
the deal and US/China talks being on and off. The geopolitical stories beyond China / US trade revolved around NATO squabbles and Trump along with the more details UK PM May real Brexit plans with less financial links. Also in play is the central bank responses to Trade War fears. The Bank of Canada yesterday hiked 25bps to 1.5% and didn’t sound dovish despite the trade fear while the Bank of Korea today was on hold at 1.5% but with a hawkish dissenter. The reaction function of central bankers to the present mix of inflation risks, geopolitical headwinds and better growth all matter – leaving last nights data interesting but not sufficient to break the mold of risk-on and risk-off trading. The mix is the same, the bartender different. This puts US rates back into the drivers seat with CPI the focus and a 30Y sale thrown in for fun.
The Morning Track mixology
- The Morning Track – Mixology by Bob Savagehttp://trackresearch.com/articles/the-morning-track-mixology/
Some argue how you mix a drink makes all the difference to its taste. Just ask James Bond, “shaken but not stirred†about it. Others will say that if the ingredients are all their, the palate will sense it and connect. This matters for markets today as we may all be driven to drink given the hot-then-cold fears over trade, China, geopolitics and such. Equity markets bounced in Asia and followed in Europe. The fear yesterday was replaced by greed today, but we sip from the same drink. The mix tastes different. CNY weakness has been connected to JPY weakness but here is the rub – that drives risk-on signals – as JPY is the carry trade anchor. JPY breaking a long-term $ downtrend is the story for many today and its at odds with other mixed signals like copper down 15% in 3 days or oil dropping 5% yesterday. The commodity collapse and the JPY weakness don’t mix logically, and yet they taste good for those looking for risk today. Some of this is just about ZTE and
the deal and US/China talks being on and off. The geopolitical stories beyond China / US trade revolved around NATO squabbles and Trump along with the more details UK PM May real Brexit plans with less financial links. Also in play is the central bank responses to Trade War fears. The Bank of Canada yesterday hiked 25bps to 1.5% and didn’t sound dovish despite the trade fear while the Bank of Korea today was on hold at 1.5% but with a hawkish dissenter. The reaction function of central bankers to the present mix of inflation risks, geopolitical headwinds and better growth all matter – leaving last nights data interesting but not sufficient to break the mold of risk-on and risk-off trading. The mix is the same, the bartender different. This puts US rates back into the drivers seat with CPI the focus and a 30Y sale thrown in for fun.
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Robert Savage
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