EUR 8.46 For Business Accounts Only

The Morning Track mourning

- The Morning Track – Mourning by Bob Savage
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The US remembers its 41st President today and markets are closed for a day of mourning, while the rest of the world reacts to yesterday’s US reversal of risk-mood and seeks understanding. There are five steps to grief – denial, anger, depression, bargaining and acceptance. The markets are somewhere in the anger and depression stages. Blame for the reversal rests on Trump’s tariff man tweet and the further inversion of the US 2-5Y curve, throw in ongoing equity market rotations from growth to value along with increased volatility and you see a market in mourning. The undoing of the Trump/Xi euphoria isn’t a surprise, but it is a disappointment – this is the slap of reality that the goldilocks narrative of benign central bankers and steady growth truly is a fairy tale. If you can’t have a bed-time tale, then there is always the newspapers. But, markets want to read the sports page first to celebrate the victorious and leave the front-page disasters for later. S
o today depends are what you read – where OPEC works on a deal to cut output by 1.3mb a day, but still needs Russia to have it work; where China is “confident” of a trade deal with the US; where Italy expects to get new budget numbers next week; where any twist on the UK Brexit leads to someone losing, either through messy politics or messy trade. The UK maybe the best place to focus on for lessons about grief as they have had two years to mourn the vote to divorce from the EU and yet no acceptance yet. The GBP looks noisy as the worst outcome for UK May increasing the hope for remaining in the EU and reversing the entire mess – many analysts are moving the odds for another referendum and new elections higher. All of which makes the GBP 1.2650 or 1.2850 levels look more important than usual in the context of trading risk into the weekend and next Monday’s vote.