EUR 9.28 For Business Accounts Only

The Morning Track rewind

- The Morning Track - Rewind by Bob Savage
http://track.com/articles/the-morning-track-rewind/

History may not repeat itself but it surely does rhyme. So the rewind of risk in Europe as the French election polls suggest less for extreme outcomes reminds us all of the last two big political events – Brexit and Trump. How markets are set up for tail-risks matters and while most with any sense of fear have hedged something, the ongoing return to risk for Europe with little to no data overnight stands out. What seems clear from the data last night is that the rest of the world ex-the US is growing just look at the Japan trade data which matched the Chinese, or the New Zealand CPI or the Japan Reuters Tankan. Inflows into EM and growth have been the trade since 1Q and the flows matter as they set the risk parameters for trouble. S&P500 was the favorite for 2016 and not for 2017 as the rise in EU and EM flows dominates. Today is just a rewind of that trade. But like all rewinds, technology matters – first it was the 8-track, then the cassette, then there was no r
ewind with the CD and in a digital world of smartphones its merely the finger that moves all. Time matters less than motion. We are chasing momentum and the weaker USD theme that started with the failure of healthcare reform in the US continues. The Trump reflation trade isn’t dead but its surely still sleeping. This leaves the markets watching the bigger risk-on mood and wondering if it will reflate the carry trades – with JPY still the favorite barometer. Unless we break the 108.35 level today and hold under it to close be ready for 110 and higher risk assets everywhere.