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http://trackresearch.com/articles/the-weekly-track-clouds/
If last week proved that global trade issues matter to the US markets, then the week ahead may be about US rates mattering to the world. There is always a concern at month-end and quarter end for USD funding and this June 30 will be no different. The risks from other stories adding to a summer of our market discontent. There is no doubt that populism hangs over the Trump trade agenda nor that immigration remains the Achilles heel for Merkel. The risk of new elections in Germany rose into play last week with the SPD while the anti-EU budget plans in Italy remains an issue for the world’s 3rd largest creditor. The China weakness in growth and its credit issues returned last week as well and trade concerns added to the fears as the CNY fell over 1% and the Shanghai Composite stock market lost over 4%. UK May managed a win on Brexit and the BOE managed to sound hawkish despite being on hold. There is a sense that trade concerns are everything but clearly its more complica
ted than that as rate policy and normalization urges also drive. This puts the balancing act for market mood as more important than usual. While there are many on the FOMC that don’t believe in financial conditions, the role of tighter policy, stronger USD, wider credit matters to the confidence of business and consumers – and that is going to be a focus next week with German IFO, US Conference Board and University of Michigan surveys. The global flash PMI reports were suggesting a world where Europe was bouncing back a bit from its long Spring slump while the US was moderating setting up for a long slow summer. The difference for the world maybe in emerging markets – particularly Asia. The mood swings on trade matter but so too does the domestic demand there. China maybe the foreshadowing of larger issues for the region. The fear of inflation seems to have flipped back even as Oil has bounced in the last week, with $70bbl WTI back in play. Whether this lasts into 2
Q end matters as well. Until then, we are in a world where the cost of money seems to matter more than usual and that means China and US policies will be central to getting the risk mood right. Unfortunately, the forecast is for clouds.
The Weekly Track clouds
- The Weekly Track – Clouds by Bob Savagehttp://trackresearch.com/articles/the-weekly-track-clouds/
If last week proved that global trade issues matter to the US markets, then the week ahead may be about US rates mattering to the world. There is always a concern at month-end and quarter end for USD funding and this June 30 will be no different. The risks from other stories adding to a summer of our market discontent. There is no doubt that populism hangs over the Trump trade agenda nor that immigration remains the Achilles heel for Merkel. The risk of new elections in Germany rose into play last week with the SPD while the anti-EU budget plans in Italy remains an issue for the world’s 3rd largest creditor. The China weakness in growth and its credit issues returned last week as well and trade concerns added to the fears as the CNY fell over 1% and the Shanghai Composite stock market lost over 4%. UK May managed a win on Brexit and the BOE managed to sound hawkish despite being on hold. There is a sense that trade concerns are everything but clearly its more complica
ted than that as rate policy and normalization urges also drive. This puts the balancing act for market mood as more important than usual. While there are many on the FOMC that don’t believe in financial conditions, the role of tighter policy, stronger USD, wider credit matters to the confidence of business and consumers – and that is going to be a focus next week with German IFO, US Conference Board and University of Michigan surveys. The global flash PMI reports were suggesting a world where Europe was bouncing back a bit from its long Spring slump while the US was moderating setting up for a long slow summer. The difference for the world maybe in emerging markets – particularly Asia. The mood swings on trade matter but so too does the domestic demand there. China maybe the foreshadowing of larger issues for the region. The fear of inflation seems to have flipped back even as Oil has bounced in the last week, with $70bbl WTI back in play. Whether this lasts into 2
Q end matters as well. Until then, we are in a world where the cost of money seems to matter more than usual and that means China and US policies will be central to getting the risk mood right. Unfortunately, the forecast is for clouds.
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Robert Savage
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