What Are Markets Telling Us?

The reflation trade appears to be still alive and well as the US goes to the polls.  Global equities are up, bond prices are down, and the dollar is weaker.  What are markets telling us?  It appears that markets are pricing in solid odds of a Blue Wave today, implying significant fiscal stimulus and debt issuance in 2021.  Because of the perceived risks of another surprise victory by President Trump, we do not think the Blue Wave is fully priced in and so there is room for further movement if Biden does indeed win.  That said, “there’s many a slip twixt the cup and the lip” and so these directional bets can quickly reverse.  Markets should not be lulled into a sense of complacency and should instead be prepared for greater volatility across all markets over the coming days. Continue reading “What Are Markets Telling Us?”

Reflation Trade Back in Play as America Votes

  • The reflation trade is still alive and well as the US goes to the polls; the dollar rally failed at top end of recent trading ranges
  • Election day is today in the US; September factory orders and October auto sales will be reported; Brazil central bank minutes will be released
  • Sterling is recovering even as the economic outlook darkens; National Bank of Poland meeting was postponed two days until Friday ; Turkey reported October CPI
  • RBA cut both the cash rate and the 3-year yield target 15 bp to 0.10% but unexpectedly announced additional QE; Malaysia kept rates steady at 1.75%, as expected Continue reading “Reflation Trade Back in Play as America Votes”

Drivers for the Week Ahead

  • This is one of the most eventful weeks for the markets in recent memory
  • Election day is Tuesday in the US; the two-day FOMC meeting concludes with a likely dovish hold Thursday; October jobs data Friday will be the data highlight
  • BOE meets Thursday and is expected to increase its asset purchases by GBP100 bln; Brexit talks continue this week and reports suggest a compromise on fisheries is taking shape; eurozone reports some key data; ECB delivered a dovish hold last week; Norges Bank is expected to keep policy unchanged Thursday
  • Japan has a light week; last week, the BOJ kept all policy settings unchanged, as expected; RBA meets Tuesday and is expected to cut both the cash rate and the 3-year yield target 15 bp to 0.10%; Australia has a busy data week too Continue reading “Drivers for the Week Ahead”

ECB Preview

The ECB meets Thursday and is widely expected to stand pat until the next meeting. Macro forecasts won’t be updated until the December 10 meeting, but the bank will have to acknowledge the deteriorating outlook now. There’s a small risk of more jawboning against the stronger euro, but it should otherwise be an uneventful meeting. We expect the ECB to increase QE in December but another rate cut seems very unlikely, as does activation of OMT. Continue reading “ECB Preview”

Drivers for the Week Ahead

  • Pressure on the dollar is likely to continue; stimulus talks really are dead now; US 10-year yield traded at 0.87% last week
  • US manufacturing surveys for October will continue to roll out; US Q3 GDP data Thursday will be of interest; BOC meets Wednesday and is expected to keep policy steady
  • ECB meets Thursday and is expected to keep policy steady; eurozone data schedule is fairly heavy; Brexit talks are likely to intensify
  • BOJ meets Thursday and is expected to keep policy steady; Japan also reports some key data; Australia reports Q3 CPI Wednesday Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • Some are holding out hope but we think the stimulus package remains dead; Fed releases its Beige Book report Wednesday; there is a full slate of Fed speakers this week
  • Fed manufacturing surveys for October will continue to roll out; weekly jobless claims will be reported Thursday; BOC releases results of its Q3 Business Outlook Survey Monday
  • Renewed virus restrictions are weighing on the economic outlook for the eurozone; no wonder ECB officials are sounding very dovish
  • Despite all the threats and bluster, it appears that Brexit talks will continue this week; Moody’s downgraded the UK a notch to Aa3 with stable outlook ahead of the weekend; UK has another big data week
  • Japan has a heavy data week; RBA minutes will be released Tuesday; NZ Prime Minister Ardern and her Labour Party easily won weekend elections Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • Dollar losses are accelerating; the virtual IMF/World Bank meetings begin Monday
  • A big stimulus package before the election still seems unlikely; there are a fair amount of Fed speakers during this holiday-shortened week
  • The main data event this week is September retail sales Friday; ahead of that, we get inflation readings for September; Fed manufacturing surveys for October will start to roll out
  • The account of the ECB’s September meeting added a layer of complexity to the bank’s outlook; eurozone reports August IP Wednesday; Brexit talks continue this week in Brussels ahead of the EU summit Thursday and Friday; UK reports labor market data Tuesday
  • Japan reports some important forward-looking data this week; Australia reports September jobs data Thursday; New Zealand holds general elections this Saturday Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • The US political outlook has been upended by recent developments; lack of a significant safe haven bid for the dollar so far is telling
  • This is a very quiet week in terms of US data; FOMC minutes will be released Wednesday; there is a full slate of Fed speakers
  • The eurozone has a fairly heavy data week; Brexit talks continue in London; UK has a heavy data week
  • Japan has a fairly heavy data week; RBA meets Tuesday and is expected to keep policy unchanged; that same day, the government releases its budget Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • Virus numbers are rising across Europe and now the US; for now, the dollar is benefitting from generalized risk-off sentiment
  • Politics will be front and center this week in the US; all eyes will also be on Capitol Hill; there is a full slate of Fed speakers this week
  • The US data highlight will be September jobs data Friday; US manufacturing readings for September will continue  to roll out; weekly jobless claims will be reported Thursday
  • The final scheduled round of Brexit talks begin Monday in Brussels; eurozone CPI readings for September come out this week; final eurozone September manufacturing PMI readings will be reported Thursday
  • Japan has a busy data week; Australia reports August retail sales Friday Continue reading “Drivers for the Week Ahead”