EUR 8.84 For Business Accounts Only

The Morning Track unwinds

- The Morning Track - Unwinds by Bob Savage
http://track.com/articles/the-morning-track-unwinds/

The fear of war declines and with it the demand for safe-havens with gold, bonds and JPY all weaker. The switch in mood turned on this headline - China will forbid importing coal, iron, iron ore, lead, lead ore, and aquatic and marine products from North Korea starting Tuesday, the
Ministry of Commerce said in a statement on its website on Monday The hope for diplomacy over military conflict dominates today. The relief in risk is going to be constrained by the reality of the data today – as the China July retail sales, IP and investment reports all missed expectations and suggest a slower start for 3Q, while the Japan 2Q GDP was significantly better than expected 4% y/y growth – seen by many as unsustainable because of Capex – but likely to give some pause to BOJ. The European data was also weaker – with IP missing the mark in June snipping a bit on 2Q GDP outlooks while Portugal missed its growth in 2Q as well. Behind the data stories is the larger fear that the US and global risk pull back last week is more than just North Korea – as the credit spreads widened with focus on HYG and EM matters. Similarly, the price of oil and OPEC success in stability for oil above the 55-day m.a. matters. Commodities won’t like today’s China data nor
will they like a stronger USD. Markets are also going to watch the US data this week and the Fed reaction function into the Jackson Hole meetings and speeches. Clarity on waiting vs. acting to normalize no matter about inflation matters to the USD and much else. So while the spinning top of markets unwinds a bit from Friday, it may not be sufficient to spur the usual buy-ever-dip and make-new-highs approach that has worked for most of the last 7 years. The top is spinning but how fast and for how long maybe best shown in the USD with JPY clearly not out of the woods for a bear market move to 105 rather than 115.