Never mind the current reality ..... it's future expectations that count.

ref :- "Fed Hits Inflation Goal Only to Find Expectations Spoiling Party", Bloomberg Markets It's not as though anyone should be encouraged to ignore the facts as they stand, but the news that expectations are often a bigger factor in any decision-making process should hardly come as a surprise. We witness it in some form or another every day. The immediate market reaction to the release of a piece of data is not a function of whether it is fundamentally strong or weak, but of how much it differs from what was expected. Historically speaking, anticipating the future has been at the heart of trading decisions but economic forecasting is a famously inexact science where events are open to diff

The problem with playing catch-up is where to begin ? China .... ? Oil .... ? Turkey .... ? Anyway,

ref :- "China's Yuan Drop Blindsides Traders, Spurs Worry on Impact" , Bloomberg Markets ref :- "OPEC Supply Buffer Shrinks as it Heeds Call to Pump More Oil" , Bloomberg Markets ref :- "Erdogan election honeymoon fades fast for assets" , Tail Risk, The Financial Times, Markets & Investing CHINA : It's all too easy to jump to conclusions in any walk of life, but in this business that can be a particularly dangerous pastime. For example, since the currency took a slide in August 2015 we've become accustomed to seeing the People's Bank of China keep pretty firm control of the value of the Yuan / Renmimbi (hereafter referred to as simply "Yuan") . So its recent fall in value -- 0.5% a day for

Calm before the storm ? We've heard it all before , but one day they'll be right .... perhap

ref :- " Markets appear calm but are behaving abnormally" , Opinion by GILLIAN TETT, The Financial Times "Not again !" , we hear you cry . It's true .... we have fairly regularly pointed you towards articles commenting on the remarkable buoyancy of a whole range of asset classes in the face of factors that in the past would have had investors reconsidering their position(s). The implication is always that markets have become complacent, overly confident that the support offered by the hugely accommodating monetary policies of central banks (amongst other things) will continue to support valuations. And guess what ? On balance and despite some recent wobbles, those investors have largely been

QUESTION : Does an end to stimulus mean the start of tightening ? ANSWER : Er, Yes .... or No .....

ref :- "Draghi treads middle path in ending stimulus" , The Financial Times, International Section. It should be a fairly straightforward question. Put more broadly, if you've been headed in one direction for a while but then stop .... does that automatically mean you've turned around and are heading back in the opposite direction ? Plainly, the obvious answer is "No" ..... but markets may well read it that way if they've become used your longtime direction of travel. Though they're not quite the same thing, much of this has got to do with the Hawkish / Doveish thing ..... and that revolves around expectations and perceptions. For example, on Wednesday the Fed raised rates by 25 basis points

Be careful about generalising EMs : Taking a look at China, Brazil and Russia ..... individually

In all honesty, we have nothing new or specific to say today in advance of the Fed's likely decision to hike rates ..... or their more eagerly awaited statement which may or may not be replete with clues about future policy. We'll just wait on that along with everyone else and pick it up later ..... and we'll probably do the same with the ECB's turn in the monetary policy spotlight tomorrow. Actually, we're just going to recommend three articles in today's Markets & Investing Section in the Financial Times. Each one offers a take on a major emerging market, and certainly two of them revolve around the wider ramifications of Fed policy . Of course all EMs are heavily affected by the Fed's dec

Hot on the heels of a catastrophic weekend for G7 ..... a HUGE week for central banks.

ref :- "Brace for the World Economy's Most Important Week of the Year" , Bloomberg Markets We don't yet fully know the level of Russian interference in the US election that ushered Donald J. Trump into the White House. We also don't yet know the level of collusion by senior members of Mr Trump's campaign team -- if indeed there was any in the upper echelons. We can guess what the Russian motives behind any attempt to influence the result might have been. Foremost among them was probably a desire to see anybody other than Hillary Clinton in the top job, such was the antagonism between Russia and the Democratic candidate when she was US Secretary of State. The fact that such a divisive and h

A Friday wrap ..... and it's not all about G7 (sorry, G6 +1)

ref :- A run around the Financial Times There's already saturation coverage of the two-day G7 meeting that starts today in Quebec. Well, that's fair enough ..... by the time it's over we might have a clearer idea whether President Trump's antagonistic, even bullying stance on trade tariffs is a negotiating tactic of the kind he favours, or incontrovertible evidence that he is fully prepared to allow a meltdown in relations with his G7 allies in order to achieve his objectives. The latter certainly seems the more likely at this stage, which is a bit ominous for a number of reasons above and beyond the obvious commercial and economic implications. The early signs are not encouraging .... Bloom

Donald Trump would have no doubts, but fortunately he's not in charge at the Fed .... it's t

ref :- "Ructions in emerging markets and Europe put Fed under pressure" , The Financial Times, markets and Investing If anyone had been in any doubt about what an "America First" policy really meant, Mr Trump's actions across a wide range of spheres should have clarified things pretty effectively. Whether it's Trade and Economics, Diplomacy (for want of a better term), Military Cooperation, Climate Change, well ..... you name it, the interests of the USA must come first despite any collateral damage to erstwhile friends and adversaries alike. Some of those friends might be left wondering whether the real question should be : "Judging from the President's actions, how can you tell whether you

It's the Carry-Trade, all right ..... but not necessarily as we remember it

ref :- "Dollar Is Driving Some Carry-Trade Returns despite Volatility" , Bloomberg Markets Ah, our old friend the Carry-Trade ..... we haven't really seen it for a while. A bread-and-butter trading strategy and a huge factor in foreign exchange markets, it essentially revolves around investors borrowing low-yielding currencies and selling them to buy high-yielding ones. The interest rate differential between the two is profit for the investor, whilst the possible fly-in-the ointment is the danger that a fall in the value of the "long" currency wipes out that profit, or worse. Typically when one talks of carry-trades the "long" currency of choice has been a high-yielder from emerging markets,

It's not just the triggers we need to worry about ......

ref :- " Italian rout points to strains in post-crisis regulatory structure" , The Financial Times , Markets and Investing Liquidity ..... or the lack of it ..... is a topic that in the past we've banged on about quite regularly but we haven't really exercised ourselves on the subject too much recently. Perhaps one needs a bit of a crash to be reminded that these problems very rarely just go away, but can lie forgotten until the next bout of market panic. The meltdown in the Italian bond market this week is a perfect example of just such a scenario, but the problem is a global one and can affect other asset classes at least as badly as it affects bonds. We've only really got the time to poin

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