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The Morning Track tit-for-tat

- The Morning Track – Tit for Tat by Bob Savage
http://track.com/articles/the-morning-track-tit-for-tat/

Discoverers have been hailed as criminals in the new world order as they promoted the spread of one civilization over that of another. Call that Spain over the Mayans or Aztecs leading to the British over the Algonquians. There is a tit-for-tat shift in thinking about the world as US hegemony shifts to a plurality of powers from China to Russia to Europe. The celebrations of Columbus and his bravery in sailing to the new world have been lost in new maps and new thinking about what is right, what is sustainable and what progress means. All that thinking misses some of the historical subtle of how we got to today and to worrying about global growth and global inequality. The net result – uneasy holiday markets – with the news about geopolitics still breeding a raw fear that tail events – even bigger than discovering a new world – could tip the present easy money, better growth, risk rally that pervades all prices. The four fears overnight were – 1) the Turkish/
US tit-for-tat visa battle as a key NATO ally sees its US relationship fray. 2) the ongoing talk of North Korea testing another missile as Russian diplomats warn the US Kim Jong means trouble. 3) UK May and cabinet reshuffle talk with “plans to demote” Boris Johnson. 4) Catalan anti-independence protests over the weekend eased some fears of immediate push for separation, but France today saying any independence won’t be recognized highlights a larger issue for the region – what does this mean for the Kurds or the Italian Northern League? This makes the return of China after its golden week all a bit less dramatic and the news of its Caixin Service PMI slipping less important. Rather the focus over the light trading in Asia and Europe was on global growth and if central bankers will have a tit-for-tat reaction to better GDP. The German Industrial Production bounce back, the steady growth in France and the ongoing rise in confidence in European investors means the EC
B has little room to remain with negative rates and big QE – unless they want to point to the EUR and to the populist threats as the excuse. For today there is really only the counter trends to watch in the USD with GBP today’s big bouncer. For EM its CNY winning and TRY losing. For the other markets it’s an excuse to wait for more news, more speeches and more data.