EUR 9.32 For Business Accounts Only

The Morning Track turns

- The Morning Track – Turns by Bob Savage
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There is a smell of hope in the air, of a risk and growth turn about as markets soak in the accolades of the first quarter for 2019. This was the best performance for China shares since 2014 – and yet China growth doubts remain front and center. The stimulus efforts and the ongoing US/China trade talks are cited as the reason for today’s outsized performance (up over 3%) but perhaps its as simple as the passive money needs to fill-up on the benchmark with China MSCI EM share rising. This makes the news flow and the market price action remain a bit less obvious again. The focus on hope over doubt is welcome as its always easier to be a bull than a bear. The list of stories that may upset this turning point continues to start with Brexit and the noise of the UK politics. Then there is Turkey and the inability of officials to prevent capital flight. Then there is the ongoing fears about Europe and growth – with Italy the example - but those are countered by ECB tiered
rate cut talk and value in shares arguments. Here is where the lower than expected German CPI, tame French and Italy prices mattered today. Finally, there is the US where the 1Q pain is set for 2Q gain expectations – this is where risk lies most as any data that puts the US divergence at risk may make the global risk turn about less obvious. The US/China trade talks were cited as the main reason for 1Q ending well – and so the USD/CNY maybe the best place to see if anything really has changed. Until then we are likely to see the low volatility enhance the search for yield in a world set up for further central bank easy money and the hunt for demand anywhere leading to USD stability rather than weakness. Wait for 6.60 CNY before trading on hope rather than month-end, quarter-end fillips.