After a lacklustre start to the day, equities have managed a useful about turn. This is in spite of c$6bn of stock coming to market last night in the US; a really stinky consumer credit number (-21.6b vs-4b est); Alibaba, CSK and Metro Pac sales in Asia; the GEA and Petroplus deals in Europe and talk of Conti following suit in the not too distant future. There should be no rush to buy this market with all this stock coming our way, right? Well, no, wrong it seems and pain trades are dotted around the market place by the look of it, Commerzbank and Renewable Energy sticking out like sore thumbs.
The $ remains the focus today, ironically it is in everyone’s minds precisely because it is so unloved. And with that, bloombergs abound, notifying us of DXY breaking the 77 level. Anyway, as a result of the dollar’s demise, oil continues up (but not as much as you’d expect), the resources are now positive on the day and the commodity currencies are rallying. Even AUD, which given the poor Australian retail sales, home loans and lending sales released today, wudda, cudda shudda put pressure on the currency as rate hike calls are quelled somewhat.
Yet again however, bonds haven’t sold off a huge amount, flirting with the 3.5% level. Now while I said yesterday I’m sceptical about buying into the reflation trade (given the still rising unemployment and wage deflation etc). Still we don’t just need reflation thoughts for bonds to sell off. With the rally we’ve had, you would ordinarily expect to see more funds directed away from bonds and into equities. This really isn’t happening and shows us that the fixed income massif are not so enamoured with the stock market’s ebullience. So something’s got to give, which it is remains to be seen…I’ve got to believe it’s stocks.
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