EUR 8.46 For Business Accounts Only

The Morning Track stampede

- The Morning Track – Stampede by Bob Savage
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The running of the bulls in equities grabs headlines overnight with China up 2.5% leading the story. Perhaps the more important story is about the ground underneath as the weaker economic data from flash PMI reports seems at odds with the US growth story. Similarly, the US rate differentials clash with the weaker USD. Nevertheless, emerging markets are mixed as the all-clear signal on trade fears continues with CNY and the China charm offense winning in Asia but not elsewhere. China stimulus talk to offset the US tariffs remains central to the suspension of disbelief about rates, growth or other stories. Those other stories are worth highlighting: 1) Brexit. The EU summit in Austria was inconclusive but with the leaders unanimously voting down the UK PM May’s “Chequers Deal.” The focus on French President Macron as a deal maker into October will be intense. 2) BOJ Noise. The BOJ cut its buying of bonds over 25-years today from Y60bn to Y50bn – and this led to a s
harp jump in yields and steeper curve. Higher bond volatility is notable everywhere. 3) Credit. The WSJ article on junk bonds rising as a share of the overall market is worth considering given the sharp uptick in rates this week in the US. When you mix these stories together they clash with the present stampede of bullishness but they also explain the subtle turn of EM in EMEA down with Turkey and South Africa still under the kosh – giving back much of yesterday’s gains. Markets are fickle and like any stampede the direction of which seems more serpentine than in a straight line. Witness the rise and fall of GBP this week in the G10. We may learn something from Brexit and trading headlines – namely that uncertainty hurts.