EUR 8.70 For Business Accounts Only

The Morning Track uncertain-trust

- The Morning Track – Uncertain Trust by Bob Savage
http://trackresearch.com/articles/the-morning-track-uncertain-trust/

The best analogy for today is about the Leonardo da Vinci “Salvator Mundi” sale at Christies for $450.3mn. It highlights the unbelievable wealth and liquidity in the world, the trust in the auction house and the uncertainty of the provenance just not mattering. The sale also marks a shift in how old masters maybe returning to style after years of contracting due to limited supply and tough value comparisons to contemporary artists. The markets are similarly returning to the old trends at the expense of calling a market top. The risk-on and risk-off mood-flip rests on uncertainty slipping and trust in central bankers rising. The BOC Wilkins speech last night highlights the Canadian list of worries which sets a good place to start in understanding the overnight nervous recoveries with equities up (Nikkei bounce of 1.5% the headline), USD holding gains, bonds lower with European auctions key. Wilkins worry list includes – NAFTA talks, monetary policy transmission –
particularly on the consumer – i.e. higher rates hitting domestic demand – and the usual about inflation remaining on the lower end of expectations. The worry list for traders is simple – High Yield and other bubbles like EM and Bitcoin – along with politics as the US tax reform and UK Brexit/politics continue to confound. Politico reported Brussels rejected a bespoke trade deal for the UK and is preparing to offer instead a limited free trade deal that would put its status as a financial capital at risk. UK May is preparing to offer Brussels up to GBP20b more to kickstart trade talks, on top of the GBP18bn she promised to pay to secure a transition deal in her Florence speech in September, according to the Sun. While in the US, Republican Senator Johnson from Wisconsin said he opposed the GOP tax package casting further doubt that the reform deal passes before year-end even as the House intends to vote today on its version. Focus in FX has been in the recovery
of EM with the USD lower there but higher against the G10. The real story for risk on or off maybe in the oil market which held in Asia but drops in Europe despite the equity bounce. US markets face heavy data today and that could set the tone for whether $54.65 holds and whether the US growth/reflation story remains with stable equity markets.