The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...
View from London: US Stocks, Dollar Skate Around Global Turmoil
10/31/2017 12:40 pm EST
U.S. politics don’t matter enough to derail equities and so rates are up, USD up and month-end is here with flows to support all of the above. Watching the USD as the key for today’s data reaction, writes Bob Savage, CEO of Track Research Tuesday.
When presented with a big meal, you can eat it all quickly or savor the best bits and leave the rest. The lesson of trading today maybe in the difference between gourmets and gourmands – there is such a thing as excess news and when you mix it with month-end and Halloween candy you can feel quite poorly.
There was so much macro-economic news overnight that the markets are unlikely to process it all without some indigestion. The key bits for those of refined palate:
1. Japan - the BOJ was on hold but changed its CPI outlook lower. The Japan data was mixed with household spending lower, industrial production less bad than feared and unemployment stable. Kuroda noted Japanese yen (JPY/USD) weakness most likely path all else being equal and that the downside risks to prices remain skewed.
2. China – the CFLP PMI reports were weaker. The five key subcomponents all lower, but fears about PBOC forced deleveraging easing, stocks rallied with bonds. Also sparking excitement, the PBOC unwound its forex forward positions in September as Chinese yuan Renminbi (CNY/USD) is up on the month and year.
3. Europe – the 3Q flash GDP was better at 0.6% q/q but the core HICP was worse at 0.9% y/y – this means ECB has tapering time aplenty. Germany is on holiday today and markets are thin in Europe.
For those who want more – the New Zealand dollar (NZD/USD) remains a mess as the latest government headlines wants to ban foreign investment house purchases along with the ANZ business survey collapsing suggesting, the private sector is scared.
Korea and China are agreeing before the Trump visit – “The two sides agreed to continue discussing the THAAD issue, which the Chinese side is concerned about, through a channel of dialogue between their militaries," the Yonhap News report said. The key point is that the unofficial economic blockade from China on Korean goods is set to end.
Europe still has political issues – Former Catalan leader Puigdemont’s lawyer is headed to Brussels to make his case while Northern Ireland’s two parties are still trying to make a coalition deal – this is key for UK May and Brexit.
All of these really doesn’t seem to matter too much to U.S. markets at the open as the mood is one of relief – call it anti-acid or yoga or just the fact that the U.S. politics don’t matter enough to derail equities and so rates are up, USD up and month-end is here with flows to support all of the above. Watching the USD as the key for today’s data reaction.
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