This is the most unproductive day for work ever. Computing power at work is used for booking trips, grabbing on-line discounts and digesting a raft of holiday-related emails. Trolling the internet for deals is perhaps a good way to think about how markets are reacting to the news headlines today – they are ignoring the bad and accentuating the good. Internet sales over the holiday weekend support the view that US demand is just fine. Despite that e-commerce shove, the alternative money BTC continues to collapse, now below $4000. This despite the need for safe-havens like gold. The weekend brought the usual geopolitical ugliness – Russia blocking the Ukraine shipping in the Sea of Azov. Russia on Sunday seized two small Ukrainian armored artillery vessels and a tug boat, which Moscow said had illegally entered Russia’s territorial waters. The sea lane was opened Monday after international pressure. NATO plans to hold an emergency meeting to discuss Ukraine. China adds to pressure on Taiwan’s President after poll defeat. Tsai, who faces presidential elections in a little over a year, resigned on Saturday as chairwoman of the Democratic Progressive Party (DPP) after losing key battleground cities in mayoral polls to the China-friendly Kuomintang. The DPP now only controls six cities and counties to the Kuomintang’s 15. The official China Daily said in an editorial Tsai had ignored Beijing’s “cooperative stance” and forced relations into a deadlock, and that “her separatist stance has lost her the support of the people on the island”. Not the news was bad for markets, with the Italian government seen bowing to budget pressure from the EU. The governing coalition is discussing reducing next year’s budget deficit target to as low as 2 percent of gross domestic product from the draft budget target of 2.4 percent of GDP, a government source told Reuters. Against the politics is the usual set of economic data with New Zealand retail sales lower, Japan flash Manufacturing PMI at 2-year lows with orders lower along with confidence, and with German IFO lower – suggesting 4Q weakness extends with no bounce back. This is a market obsessed about US divergence still but the news overnight is all about hope and watching the G20 to see if there is a trade deal and a bounce back to globalization trends. The chart that matters is in 10Y yields with the FOMC minutes and a host of FOMC speakers driving the argument that Fed hikes are closer to the end – stalling the USD rally, helping oil and equities and making the double top in US 10Y yields important. Watching 3.10% and 2.98% today and this week for proof that something has changed.
Question for the Day: Is the ECB bullish? There is a host of ECB speeches to dissect today after a weaker German IFO and an upbeat Italian bond and stock market on hopes of EU budget compromises. No one is quite sure if the 4Q slowdown in growth in Germany will lead to less from the ECB but here is what they have said so far this morning – maybe they are all looking at the IFO clock:
