EUR 9.28 For Business Accounts Only

The Morning Track talking-4

- The Morning Track – Talking by Bob Savage
http://track.com/articles/the-morning-track-talking-4/

There is a sense of urgency to the US/China talks ahead as North Korea launched yet another missile overnight. The idea of the US going it alone to neutralize the hermit kingdom isn’t what China wants. The Xi/Trump talks ahead become that much more important as the control that China really has over the renegade regime appears to be tested by their actions. That is the lesson of the day – talking and doing are the same things – and there was plenty of talking going on overnight with just the Service PMI reports to actually move markets. Talks about Brexit are heating up with the EU clearly pushing the E60bn bill as a “clearing of obligations” rather than as a punishment for leaving the EU club. Perhaps true, but politically difficult for the PM May to view it as such at home. For France, the second Presidential debate went to Melenchon though it was all eleven candidates and Macron fared well compared to the field. Both Fillon and Le Pen were attacked for th
eir judicial issues. Net result – no change in the thinking that Macron is the likely winner but he edges down 2% to 24% in first round and drops to 60%-40% margin in 2nd round poll –showing no confidence that it will simple. In Italy, the government is about to pass an E3.4bn emergency budget to tighten its fiscal targets to prevent European Commission sanctions. This will not be something that plays well for voters and adds to fears about 5-Star winning the expected 2018 early elections. In Poland, the National Bank left rates unchanged at 1.5% - as expected – but not helping the cause of talking down deflation fears. This leaves the market watching the lower bound of the US yields in 10Y as the curve flattened yesterday and holds so far today with the ADP and Service ISM and FOMC Minutes all possible drivers for a break – but the backdrop of talking heads and talking leaders matters even more.