EUR 8.82 For Business Accounts Only

The Morning Track sysiphus

- The Morning Track – Sysiphus by Bob Savage
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Imagine a happy Sysiphus, pushing the rock up the hill, almost to the end, then gravity returns the stone back down day after day. Investors climb the wall of worry in a similar fashion but the mood is determined by where the rock is relative to the hill. Now imagine US/China trade talks as they appear almost finished, according to the FT, but tariff removal and enforcement issues push us back to reality. Imagine Brexit deals where cross-party talks open the chance for a softer plan and a long extension with the EU but rip the Tory Party into a deeper civil war and open new election risks. Imagine growth globally recovering with China March PMI bouncing but the forces of the credit bubble pop driving PBOC reactions to stem speculation, driving bonds lower and growth outlooks back down. Imagine the RBA willing to cut but for the new budget and a surprise bounce back in retail sales. There are lessons from the myths of Greece and perhaps today is the day we relearn them. To
o much debt means longer-term problems. The ability for central bankers to cut and stabilize markets may not be enough in the next downturn. The policy pivot from the FOMC and others drove markets in 1Q and remain the key to 2Q. There are tidbits for change afoot – from the sharp selling of China bonds to the sharp rally in equities to the stalled FX emerging market currencies where ARS and TRY remain the fear trades.
• Australian Government budget sees A$7.1bn surplus for FY2020 and cuts GDP forecast to 2.75% from 3% - unlikely to be a budget to change RBA rate cut risks.
• Asia Development Bank sees growth softening in region to 5.6% in 2020 from 5.9% in 2018.
• Turkey CPI rose just 1.03% m/m, 19.71% y/y – more than the 19.5% expected – but down from the 25% highs in 4Q.
What this all means for today rests on how the momentum factors for equities and commodities play against the reality of economics. The bounces in PMI were not sufficient for Europe. Bunds are flashing yellow even as the DAX rallies. The EUR is nowhere and the GBP is ignoring the clear costs of Brexit as shown by its shrinking services PMI. The barometer of choice today is in EM markets with the MXN the right mixture of politics, economics and liquidity – watching 19.15 as the pivot for 18.80 retest and more risk-on carry plays with less border closing fear.