EUR 9.38 For Business Accounts Only

The Morning Track testing-2

- The Morning Track - Testing by Bob Savage
http://track.com/articles/the-morning-track-testing-2/

Globalization is being tested. This is the call from the IMF and from Bridgewater’s Dalio – and the political worries about Europe are going to be next in the line after the Trump election in dragging down global growth outlooks. We are still stuck testing the theory that the rest of the world matters to the US markets. So far, higher rates and a stronger USD have notably tightened US financial conditions (call it 1% among friends) while the equity markets merely pause and seem intent on new highs again today. We are in a testing phase about relationships – does oil reflect the USD bid or the rest of the world losing steam? Do US bonds reflect real growth or just expectations for Trumpflation. Lots of testing questions but fewer answers with the US data yesterday good enough to justify the breakout moves from Monday and today’s data likely to add to the list of reasons for the FOMC to surely hike in December and soon again after that as they seem behind the cu
rve. The data overnight was light – with focus on UK jobs – claims up but unemployment lower – and Australian wages sagging and opening up RBA risks for doing more easing. But the main news overnight wasn’t in headlines but in the price as the yield curve flattened in Japan and tests the will of the BOJ to do something about it JPY moves closer to 110 and that maybe enough for the BOJ to declare victory except for the EM pain in Asia and elsewhere where USD gains are beginning to spark real concerns. US financial tightening isn’t a great driver for hope in the rest of the world.