EUR 9.38 For Business Accounts Only

The Morning Track supermoons

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

The volatility continues and - like the moon - everything seems bigger – rates, equities, FX and metals. Today marks the biggest “supermoon” event since 1948, something that won’t be repeated until 2038. Markets are buying into the Trump reflation trade and not worrying much about anything else. It’s like looking at the moon and thinking you won’t need lights at night anymore. Trading lunacy maybe dominating as objects appear further from a big paradigm shift than they actually are. We seem much closer to a break of the 30-year bond bull market. The overnight news did matter and yet it was mixed and complicated much like watching traffic in a rear view mirror– like the present trading environment with domestic bliss and international agony – particularly in Emerging Markets.
• Trump names RNC Reince Priebus as Chief of Staff – seen as key for working with Congress on tax reform, healthcare and immigration.
• Japan 3Q GDP rose 2.2% - better than 1% y/y expected - but deflator was -0.1% vs. +0.3% y/y expected, 0.7% in 2Q. The last time Japan’s GDP deflator was negative was 4Q2013.
• New Zealand PM Key sees earthquake damage at “couple billion” but effect on economy mixed with rebuilding helping growth again.
• China Retail Sales miss expecations – October up 10% from 10.7%.
• China fiscal spending drops 12.5% y/y in October – blamed on local governments and base effects.
If there was one chart in FX that shows the issue for a stronger USD its JPY as the move over 107 last night opens 110 and higher but this means real troubles ahead for Asian EM starting with KRW and TWD and extending to China and then the rest of the world. The effects of the USD gain overnight of almost 1% everywhere means inflation and FX reserves and policy rethinking.