EUR 21.16 For Business Accounts Only

The Weekly Track rotations-2

- The Weekly Track – Rotations by Bob Savage
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Investors climbed a wall of worry last week but made little headway higher. Focus was on better earnings against the usual global economic and political concerns. China produced a weaker GDP for 3Q than expected but announced stock supportive measures and further stimulus plans. Europe had another bought of Italian budget and political fears but no new pain for BTPs. In fact, the Friday Moody’s cut to Baa3 – the last rung of investment grade – removes fears of junk status for now and makes ECB reinvestment buying no issue in 2019. The UK had another disappointment with Brexit deals and the EU but nothing new for GBP. The Saudi intrigue over the death of Washington Post Journalist Khashogghi continued to nag oil and technology as fears over sanctions remain in play but US actions were slow and inventories plentiful driving down the price of oil. Next week, the easy money policies that have dominated since the great recession of 2008 are the focus as the BOC, ECB, Rik
sbank all meet to decide on rates with their forward guidance the key tool to watch. Last week brought the FOMC minutes and they were hawkish enough to spook markets but not enough to sustain a further move down in bonds as equities counterbalanced and the strange moderation of moves left everyone trading taking a moment to consider the next move. Politics in the US continue to face the mid-term election risks and Trump continues to campaign, with weekend talk of a middle-income tax cut sweetener adding to the fears about deficits and the significant borrowing in the week ahead. All of which, leaves equities treading water, rotating sectors without much forward progress to break out of the 2650-2850 S&P500 range but with many expecting more volatility as the waves of doubt from last week all remain in play.