EUR 8.84 For Business Accounts Only

The Morning Track sideways

- The Morning Track – Sideways by Bob Savage
http://track.com/articles/the-morning-track-sideways/

Some things can be better on their side, but bottles when opened can be messy and that perhaps was the point of the 2004 movie by that title. Markets can learn from art. Sideways markets stick to trends and old themes rather than read the daily headline, which like the newspapers of old, have bad news on the front and victory on the back sports page. We may need to turn things sideways to get the right perspective to trade risks. The weekend headlines mix the usual tragedy with hope as the UK sees a retaliatory domestic terror attack as a van runs over 11 worshippers near a mosque, as the US sees 7 Navy Sailors dead after a Destroyer collision with a Japan cargo ship and the US shot down a Syrian jet after it bombed US-back forces putting the Russian control of the airspace into question. On the brighter side of the news, Macron’s new party LREM wins 350 seats in French Parliament – biggest majority in 15 years - and Italian FinMin Padoan said that the government is
heading toward an agreement on MPS and working actively quickly on solutions for the two Veneto banks. He said that there would be no bail-ins. These stories just didn’t matter much to markets. Instead, the sideways action is all about what could happen tomorrow from the MSCI decision on potentially adding China shares to the mix, to the PBOC/MOF liquidity operations as the yield curve improves with 1Y back below 10Y rates, and as the China home prices show stability rather than collapse. As for Japan, the better imports show ongoing domestic growth while the coast of oil accounts for the flip from surplus to deficit on trade – something that makes JPY less stable and maybe helps Kuroda get back to 115. But the real movers overnight were in Australia as the RBA Lowe speech highlighted household risks and so did Moody’s as it downgraded the Australian banks. AUD sold off 0.5% only to bounce back in London as carry and commodities mattered even more. So we are stuck
in the sideways themes with bonds up, equities up and the USD down. Until US bonds break over the 200-day resistance at 2.21% little will be different.