E Tie-Breakers

Everyone loves the entertainment of a tie-breaker with the sweaty palms of anxiety over the speculation for the winners and losers that permeates the air of this cold Tuesday for traders. We are in the 5th day of trading for 2019 and the volatility; uncertainty of policy and economic growth continues to hang over the nascent recovery in asset prices.  Overnight positive comments on US/China trade continued but politics elsewhere start to matter – North Korea Kim visits Xi for their 4th summit. South Korea Moon reshuffles his cabinet as his approval ratings fell to record low 45.9%. Confidence in Japanese consumers fell again, German industrial production fell again – making clear German growth in 4Q will be near zero, while EU confidence across the economy fell more than expected. The markets maybe holding better than the news headlines today – especially in FX where the EUR and GBP are not yet reflecting the pain to the USD. The US dollar weakness in 2019 maybe about the only connection back to 2018 that rhymes as US negative outlooks on growth, rate spreads, politics and capital flows remain mired in doubt despite the clear recovery of technicals in the S&P500. The correlation of the weaker USD to better US moods might matter a bit to those looking for other tie-breaking scenarios give the bid today. The USD nascent downtrend has further to go if you believe the chart and not the economic data differentials but today looks like an important tie-breaker risk with 96 the pivot and 96.80 key break. Today’s trade and JOLTs report seem unlikely to matter much in the bigger competition for investors money and confidence but they may lead the USD and foreshadow the year ahead. 

Question for the DayWill trade data matter again? The link between global trade growth, industrial production and business confidence matters and is clearly signaling that 1Q GDP won’t be as good as last year. The IMF chart that was the most viewed in its blog is below and worth considering. The headline news of the day – Samsung warning on earnings, Ford recalling 1 million vehicles, Sears facing liquidation, WeWork cutting back its deal with Softbank– these are bottom-up stories about the business cycle hitting the tape. Confidence matters. 

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