The key change in the data helps support the idea that Europe is better together than apart. The euro (EUR) is stuck 1.15-1.16 accordingly and that becomes the focus for risk today, writes Bob Savage.
Month-end flows, ongoing see-saw action on U.S./China trade and the rising doubt about global growth continues to move markets.
So, are there any new targets for worry today? The price turn from Asia to Europe tells you to look.
The storyline delivered so far –
1) Blame Kudlow. The turnabout in mood from US morning to afternoon in equities has been blamed on White House Larry Kudlow’s Fox Business interview that China’s response to U.S. trade demands has so far not been satisfactory.
2) Devalue currency. The Chinese yuan (CNY) is weaker with one researcher in China calling for a 6.50-6.70 range to buffer against export pain from U.S. tariffs. Another government think-tank leaks a report that warns of potential financial panic. “We think China is currently very likely to see a financial panic,” NIFD said in the study, leaked to Bloomberg, confirmed by officials.
3) North Korea actions matter. The satellite photos show North Korea upgrading a nuclear site despite the Kim Jong Un’s commitment to denuclearize. Analysis from 38 North reports on modified cooling system for the plutonium production reactor.
4) EU Summit highlights political risks and Merkel role. As trade concerns linger, the EU leaders need to address a series of challenges, with the migration crisis among the main ones, and expectations are low that significant progress can be achieved. In a speech on Thursday to the lower house of Germany’s parliament, Chancellor Angela Merkel said that “migration may well turn into a question of the EU’s destiny.”
PM May has been warned time is running out to secure a Brexit deal and that talks need to intensify. With no progress made on the Irish border issue, Brexit is not expected to be discussed at the summit.
So far, the list has been obviously negative for markets – but this turned in Europe as the Confidence Surveys for Business and Consumers held and as the CPI flash reports suggest the ECB will have a real excuse to taper in 2018.
What seems most clear in the price action shift from U.S. afternoon through to Europe morning is that the EU summit is widely expected to produce a positive despite the odds of a fracture.
The key change in the data helps support the idea that Europe is better together than apart.
View TrackResearch.com, the global marketplace for stock, commodity and macro ideas here
