Report
EUR 8.14
For Business Accounts Only
http://trackresearch.com/articles/the-morning-track-off-balance/
US rates continue to dominate market focus – with 10-year firmly over 3% and spreads to Europe back to June 1999 highs. FX is responding with a stronger USD. Equities continue to wobble as rate concerns promote the view that this is the best it can get for the global economy. Witness the Caterpillar caution on profits peaking. The pull back of money in risk to cash prevails. In February the equity washout was inspired by positions and rising volatility. In April the washout in other markets also looks to be about positioning – with USD shorts notable. The one oddity is that short US bond positions remain in vogue. The explanation for bonds reverts back to economic data – where US real rates rise along with growth outlooks and inflation - nominal GDP matters. With virtually no major economic releases overnight, markets look off-balance and searching for news. The 75bps rate hike from Turkey was a small surprise but it didn’t work in holding back USD buying – TR
Y is off 0.6% to 4.1065 now. We are all waiting for the ECB and US bond supply and more from the BOC next. Geopolitical concerns being put on the back shelf aren’t enough to support risk – even as headlines suggest the US/China trade spat resolves, that EU/UK customs union deals evolve and NAFTA seems close to renewal. The selling of equities is put into context just as the rally up in rates and USD – with the consensus being less panic and more positioning driving today. Markets are searching for a stable equilibrium for bond yields, equity valuations and FX to justify prices in an uncertain world filled with tail risks. The mystery for today is in the safe-havens other than bonds – with JPY and CHF telling us that we should be buying any dip in risk moods and praying for ECB Draghi to provide us the fundamental proof tomorrow. With little more than US earnings (FB being the focus) and a big 5Y auction – this strategy looks technically wise but uncomforting le
aving off-balance and on the sidelines.
The Morning Track off-balance
- The Morning Track – Off Balance by Bob Savagehttp://trackresearch.com/articles/the-morning-track-off-balance/
US rates continue to dominate market focus – with 10-year firmly over 3% and spreads to Europe back to June 1999 highs. FX is responding with a stronger USD. Equities continue to wobble as rate concerns promote the view that this is the best it can get for the global economy. Witness the Caterpillar caution on profits peaking. The pull back of money in risk to cash prevails. In February the equity washout was inspired by positions and rising volatility. In April the washout in other markets also looks to be about positioning – with USD shorts notable. The one oddity is that short US bond positions remain in vogue. The explanation for bonds reverts back to economic data – where US real rates rise along with growth outlooks and inflation - nominal GDP matters. With virtually no major economic releases overnight, markets look off-balance and searching for news. The 75bps rate hike from Turkey was a small surprise but it didn’t work in holding back USD buying – TR
Y is off 0.6% to 4.1065 now. We are all waiting for the ECB and US bond supply and more from the BOC next. Geopolitical concerns being put on the back shelf aren’t enough to support risk – even as headlines suggest the US/China trade spat resolves, that EU/UK customs union deals evolve and NAFTA seems close to renewal. The selling of equities is put into context just as the rally up in rates and USD – with the consensus being less panic and more positioning driving today. Markets are searching for a stable equilibrium for bond yields, equity valuations and FX to justify prices in an uncertain world filled with tail risks. The mystery for today is in the safe-havens other than bonds – with JPY and CHF telling us that we should be buying any dip in risk moods and praying for ECB Draghi to provide us the fundamental proof tomorrow. With little more than US earnings (FB being the focus) and a big 5Y auction – this strategy looks technically wise but uncomforting le
aving off-balance and on the sidelines.
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Robert Savage
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