There is a skate park feel to trading as the painful retreat of equities and oil feels like a trick gone bad, writes Bob Savage Friday. He’s presenting at Crypto Intelligence TradersExpo.
The ollie fail today has many reasons – the FOMC hawkish tone, the Saudi OPEC doubts, China confidence crumbling (Auto sales of 12% in Oct), US politics, Italian banks, Brexit deal doubts,What is clear for markets is you don’t get off the half-pipe accident without some blood, sweat and tears.
Overnight economic stories didn’t help – UK industrial production weaker, UK 3Q GDP in line but September weaker, UK trade still a drag, China PPI/CPI in line but not helpful for growth, Australian SOMP upbeat on growth but sees more risks on trade.
Beyond the economic headlines – which are mixed at best – you have these tidbits to consider:
• Italian banks are moving BTP holdings from to the back-book. The ability to not mark-to-market liquid sovereign bonds seems problematic for ECB and QE ending. Accounting changes don’t make the losses better as this is about collateral for other risk and hampers future loans and growth.
• China business and consumer confidence in doubt. The number of “uncertain” word counts in recent 4Q outlooks from China companies and the drop in consumer spending (which will be known more clearly next week) driving doubts about policy stimulus working.
• European growth outlooks are being marked down. Even with oil lower, the outlook for 4Q growth is lower and the EU Commission reports from yesterday are hurting.
When you mix this all together the uptrend for the U.S. dollar (USD) holds as it’s the October safe-haven and perhaps still the same for November. What seems most hurt in the week isn’t the euro (EUR) or Chinese yuan (CNY) but oil and that maybe the key for watching risk in equities into the weekend.
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