EUR 9.28 For Business Accounts Only

The Morning Track star-wars-day

- The Morning Track – Star Wars Day by Bob Savage
http://track.com/articles/the-morning-track-star-wars-day/

May the 4th be with you. Or more accurately may the prescient movie saga bring joy to our robot overlords. Around each market hangs a Darth Vadar –for macro types that is oil lower, iron ore off 7.7% - down limit, Nickel off 2.5% at 11-month lows - and yet many see the Confederation winning =or is that the Congress finally acting on healthcare with a repeal and replace plan for Obamacare. US politics are not the only game – as Italy passes its 20-key reforms again and the final French debate last night is seen as going to Macron despite a few Le Pen zingers – the favorite “France will be ruled by a woman after this election – either Merkel or Le Pen.” The net result overnight is that risk is on for equities despite a FOMC message that shifted its data-dependency to a higher bar against its urge for rate normalization – translated to mean we are going to get a June hike. Higher rates despite a weak 1Q GDP are different than in 2015 and so many get excited a
bout the USD again but not sufficiently to counter the joy of Europe and growth there as PMI reports particularly from Italy and Spanish jobs drive up expectations to 2Q GDP. The pain trade is in China where rates squeeze to 2-year highs and don’t mix with weaker Service PMI adding to the Manufacturing PMI worry to make 2Q outlook weaker and so commodities dump. The Norges bank stoically held rates unchanged promising ongoing easy money bias even though oil looks dangerously close to a $45 breakdown. Perhaps the Swedes knew something. As for other stories from the overnight – the movie hasn’t changed as 1Q earnings are the micro stories that matter. But there is a light-saber to fear for those in FX – as the oil correlation shift for the USD is notable and suggests that the drop in commodities overnight might be more important powerful than the FOMC.