EUR 8.46 For Business Accounts Only

The Morning Track no-plans

- The Morning Track – No Plans? by Bob Savage
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TGIF. One last day of work for many frustrated by the sharp turn of mood from bull to bear for equities and from hawk to dove for monetary policy over the week. While we are preached to live in the moment and be mindful, the empathy of the now overwhelms any plan or hope for change. The yield curves in Europe are telling us something about the future as the negative yields in Germany creep out from 5-years to 9-years. The flattening of hope means that dreams for normalization and growth are eroding fast. Overnight, the two drivers for markets came from the Trump dour quip that a meeting with China Xi before March 1 was “highly unlikely” and from the RBA SOMP, which cut growth outlooks even sharper than the BOE and EU Commission yesterday. Between Brexit and US/China trade wars, there is no room for investor error and no plan for bonds to be anything but bid by central bankers. The push of positions against a grim reality mixed with unflappable faith in the magic of
the Powell Put may explain January price action, but it fails in February. Today is about something else, future planning and how the present troubles can linger longer than anyone wants or hopes – witness the weakness in Italy and Sweden data, the rise of German trade surpluses and the trouble in Japan EcoWatchers. Consider the AUD as the bellwether for adjustments as rates plummet with the dovish RBA and the AUD reflects how yields matter to FX. The lack of FX moves other than AUD might be an important point to consider as the price adjustments are in fixed income now, equities second and FX third. Global flows are confused and likely to stay that way until we get more clarity on trade policy and Brexit plans.