We’re back to watching the safe-havens with gold, bonds and Japanese yen (JPY) all up. The barometer that seems most correlated to EM pain and stock wobbles is the euro/Swiss franc (EUR/CHF) and it’s still flashing yellow, writes Bob Savage Thursday.

There is a bit of a Hamlet moment for trading markets this week, some want to take arm against a sea of troubles and by opposing end them. Others are less courageous. The U.S. divergence theme isn’t going away but its meeting up with ugly politics in the U.S. with the net result that the relentless U.S. dollar (USD) bid has cracks today and the emerging markets are less scary.

The urge to buy the dip and argue we have seen the capitulation seems a bit too simple. There are other themes at play mixed with the headlines of the Swedish Riksbank on hold at -0.5% but promising to hike in December or February still.

The Swedish krona (SEK) is the weakest of the G10 off 0.3% to the USD.

Germany saw weaker factory orders but the euro (EUR) is up 0.1% on the day. The point is growth just doesn’t always matter.

There are three other themes at play today:

1) Global real rate spreads driving flows. Inflation data in EM and DM matter to present divergence trade.

2) EM U.S. borrowing rates are so wide to local yields that USD bids aren’t going to go away even in the face of “value” buying.

3) U.S. tech and the risk of regulation. Trump warned Facebook (FB), Google (GOOG) and Twitter (TWTR) last week and the hearings this week make clear the risks.

The point being that the moderation in fear of EM today is modest at best and the new themes beyond divergence are countering any feel-good-buy-the-dip ideas.

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