When bonds and stocks both rally along with commodities, markets have no fear. This was true for Europe but remains in play for the U.S. Dr. Copper is telling us another story, writes Bob Savage Thursday. Watch the Dollar Index today.

U.S. bonds are still above 3.05% in 10-year and economic data on existing home sales along with the Philadelphia Fed Manufacturing Index– all could change the greed balance.

However, the shift up in risk-taking stands out this week. The overnight drivers for the continued bounce in emerging markets and in global equities rests with less U.S./China trade fear along with growth justifying rate normalization in the rest of the world. Nevertheless, monetary policy is seen as easy and remaining so for most of the world.

Markets took the Norges Bank rate hike in stride, see the FOMC next week as expected and watch the ECB tapering next.

There were two other drivers today:

Brexit – Day 2 in Salzburg – after a rough 24 hours for EU/UK where EU Commission Juncker said any deal was still “far away,” while UK PM May said the EU plan for Northern Ireland was “not credible.” EU leaders are calling for a compromise. The expectation for a verbal deal is rising.

Abe wins LDP leadership vote – The Japan PM is on track to be the longest serving premier beating out Taro Katsura from the 20th century. Abe won 553 votes to Ishiba’s 254. Of the 810 votes up for grabs from LDP parliamentarians and rank-and-file party members, 807 were valid.

The lack of fear from U.S. rate moves over the last few days has not hurt EM or helped the U.S. dollar (USD) and in that many are going to focus as the fundamental story doesn’t fully match the breaking correlations.

Better growth, wider rate spreads, steeper curves – all that seems at odds with the value buying in EM. The U.S. Dollar Index (DXY) maybe the right place to watch for such a flip from greed back to fear.

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