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EUR 9.28
For Business Accounts Only
http://track.com/articles/the-morning-track-taper-talk/
The only way to kill a good party is to take away the punch bowl. The risk for the European equity rally is Thursday with the ECB meeting and talk of tapering back their bond buying and moving up rates from -0.4%. This would be reasonable given the 12% year-to-date gains in the stocks vs. USD but it would be back-tracking for Draghi and it would also mean that financial stability includes capping euphoric moves to the upside. Is Europe ready to move back to reality? Not yet, even as Unions in Italy reject a restructuring plan for Alitalia – an Etihad-owned company -highlighting the need for real reform across Europe. Italy also has plenty of political worries with the French Macron lead likely to inspire the April 30th democratic party leadership election. The risk for an early election there remains. Of course, the overnight US political news remains a break on some with up to a 24% tariff on softwood lumber hitting Canada and with Trump team talk of a 15% rate for
corporations (down from 38%) coming in the plan Wednesday but with the deficit spending the sticking point and larger divide for Republicans – along with the US auctions starting today as a barometer. The UK may also be worth considering on deficits as the PSBR today highlights long-term improvements but a larger than expected need to borrow – making the risk for UK PM May snap election all about financing – and the real tax rate in the UK into Brexit. The focus on markets is less about FX today and more about rates – with the German Bund unwinding of safe-haven money bleeding into other such places still like JPY and Gold and US bonds. The level of US bonds despite the ongoing wobble in the oil patch balances against the taper talk trade in Europe with 2.40% 10Y the bear target but 2.10-2.15% the more logical place to take a position fading US bonds. The USD correlation to higher yields hasn’t yet materialized nor has the optimism in the growth side – as it
needs more data to justify the move. This makes US bonds the risk-on barometer to watch today.
The Morning Track taper-talk
- The Morning Track – Taper Talk? by Bob Savagehttp://track.com/articles/the-morning-track-taper-talk/
The only way to kill a good party is to take away the punch bowl. The risk for the European equity rally is Thursday with the ECB meeting and talk of tapering back their bond buying and moving up rates from -0.4%. This would be reasonable given the 12% year-to-date gains in the stocks vs. USD but it would be back-tracking for Draghi and it would also mean that financial stability includes capping euphoric moves to the upside. Is Europe ready to move back to reality? Not yet, even as Unions in Italy reject a restructuring plan for Alitalia – an Etihad-owned company -highlighting the need for real reform across Europe. Italy also has plenty of political worries with the French Macron lead likely to inspire the April 30th democratic party leadership election. The risk for an early election there remains. Of course, the overnight US political news remains a break on some with up to a 24% tariff on softwood lumber hitting Canada and with Trump team talk of a 15% rate for
corporations (down from 38%) coming in the plan Wednesday but with the deficit spending the sticking point and larger divide for Republicans – along with the US auctions starting today as a barometer. The UK may also be worth considering on deficits as the PSBR today highlights long-term improvements but a larger than expected need to borrow – making the risk for UK PM May snap election all about financing – and the real tax rate in the UK into Brexit. The focus on markets is less about FX today and more about rates – with the German Bund unwinding of safe-haven money bleeding into other such places still like JPY and Gold and US bonds. The level of US bonds despite the ongoing wobble in the oil patch balances against the taper talk trade in Europe with 2.40% 10Y the bear target but 2.10-2.15% the more logical place to take a position fading US bonds. The USD correlation to higher yields hasn’t yet materialized nor has the optimism in the growth side – as it
needs more data to justify the move. This makes US bonds the risk-on barometer to watch today.
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Robert Savage
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