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EUR 9.12
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http://track.com/articles/the-morning-track-not-more-or-less/
The Trump speech delivered less details than some investors wanted, was equal on expectations of rhetoric but stylistically more tame than many expected. On the other hand, FOMC speakers, starting with New York Fed Dudley were more hawkish. Animal spirits were cited as reason to hike sooner rather than wait. The balancing act of higher US rates and higher US spending was flipped to a bull run for risk as the economic data globally suggests a better 1Q 2017 growth rate. This set up the overall market for stronger equities, lower bonds, stronger USD and stronger commodities overnight. The forward looking positives of the economic data outweigh the negatives. Global growth outlook for manufacturing in Europe is at 70-month highs with better orders, jobs and production. Australian 4Q GDP was better – bouncing back sharply from 3Q. Japan 4Q Capex was better – suggesting a higher GDP revision. China Manufacturing PMI rose – second best in 4 ½ years. Korea Febraury ex
port growth jumped 20.2% y/y – an upside surprise to say the least. German jobs continue to improve but inflation is gaining as well. The negatives today are about price pressures – clear in all the PMI reports – and clearly making something wobble in the UK PMI report along with the notable drop in M4 there to 5-year lows. Credit growth and inflation don’t mix well. This will be the problem for central bankers globally as they deal with negative real rates, higher than expected growth and higher inflation with the surplus labor capacity or the emerging world seemingly gone and the tired and lost generations of developed markets remaining unproductive. The key fear from this is still about politics and overnight Macron gained while Fillon lost – with his investigations ongoing. We can all talk about how FX rates will adjust away bad inflation outcomes – just ask Zimbabwe – but the issue for today is the sharp reversal in global rates with the US 10Y the bell
wether in play with 2.45% break looking set for the 2.65% boundary again. This has some implications for the USD, gold, and perhaps on the edges EM equities, other bonds, and dare we say some US equities?
The Morning Track not-more-or-less
- The Morning Track – Not more or less? by Bob Savagehttp://track.com/articles/the-morning-track-not-more-or-less/
The Trump speech delivered less details than some investors wanted, was equal on expectations of rhetoric but stylistically more tame than many expected. On the other hand, FOMC speakers, starting with New York Fed Dudley were more hawkish. Animal spirits were cited as reason to hike sooner rather than wait. The balancing act of higher US rates and higher US spending was flipped to a bull run for risk as the economic data globally suggests a better 1Q 2017 growth rate. This set up the overall market for stronger equities, lower bonds, stronger USD and stronger commodities overnight. The forward looking positives of the economic data outweigh the negatives. Global growth outlook for manufacturing in Europe is at 70-month highs with better orders, jobs and production. Australian 4Q GDP was better – bouncing back sharply from 3Q. Japan 4Q Capex was better – suggesting a higher GDP revision. China Manufacturing PMI rose – second best in 4 ½ years. Korea Febraury ex
port growth jumped 20.2% y/y – an upside surprise to say the least. German jobs continue to improve but inflation is gaining as well. The negatives today are about price pressures – clear in all the PMI reports – and clearly making something wobble in the UK PMI report along with the notable drop in M4 there to 5-year lows. Credit growth and inflation don’t mix well. This will be the problem for central bankers globally as they deal with negative real rates, higher than expected growth and higher inflation with the surplus labor capacity or the emerging world seemingly gone and the tired and lost generations of developed markets remaining unproductive. The key fear from this is still about politics and overnight Macron gained while Fillon lost – with his investigations ongoing. We can all talk about how FX rates will adjust away bad inflation outcomes – just ask Zimbabwe – but the issue for today is the sharp reversal in global rates with the US 10Y the bell
wether in play with 2.45% break looking set for the 2.65% boundary again. This has some implications for the USD, gold, and perhaps on the edges EM equities, other bonds, and dare we say some US equities?
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Robert Savage
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