We are seeing actions/reactions that don't fit into a mental matrix developed over many years at the market. Things like a weaker dollar in the face of higher U.S. rates/rate differentials, when both experience and theory would suggest the opposite. Commodity moves that don't appear to have much connection to supply/demand considerations. There are actually a half-dozen that come to mind and as we've said over the years it is in the interstices of these anomalies that you'll find opportunity. Just guess right as to what it all adds up to.
From Marc to Market:
Overview: The dollar initially extended yesterday's North American recovery but unwound most of the gains in the European morning. As North American dealers return, the greenback is lower against most of the G10 currencies. After approaching levels believed to have been where the BOJ last intervened, profit-taking pushed the dollar back to a marginal new low for the week (~JPY156.55). The yen's recovery arguably helped the Chinese yuan rise for the first time since May 15. The euro held important support near $1.0785 and sterling did the same near $1.2675. Still, the currencies' recovery in Europe stretched intraday momentum indicators. This suggests the risk favors selling into the upticks rather than piling on. Jitters over yesterday's South African election has weighed on the rand (~-1.2% today), and the thin Asia Pacific liquidity saw the Mexican peso extend yesterday's slide. Mexico goes to the polls Sunday, but market positioning more than election developments per se seem to be behind the peso's rout.
Asia Pacific equities followed Wall Street lower. Many of the large bourses, including the Nikkei, Hang Seng, Taiex, Kospi, and India, were off more than 1% today. After falling more than 1% yesterday, the biggest drop since mid-April, Europe's Stoxx 600 has come back bid today and it is up about 0.35%. However, US index futures are 0.4%-0.8% lower. Bonds are recovering from yesterday's sell-off. The 10-year JGB yield slipped a couple of basis points (to 1.05%), while European benchmark bonds are 2-3 bp lower (except Switzerland and Sweden, which reported stronger than expected Q1 GDP). The 10-year US Treasury yield is off a couple of basis points to 4.59%. Gold is extending its losses and reached $2322, a marginal new low since May 9. July WTI reached $80.60 yesterday, its best level since May 1. It settled near its lows and follow-through selling saw nearly $78.75 today. It is straddling the $79 area in the European morning....
....MUCH MORE
Reusing an outro from April 22:
....As cross-asset analyst John Normand wrote in his last - after twenty-four years - research note for JPMorgan:
How to time mostly efficient markets ("Tactical position-taking assumes one can time the market to outperform the benchmark, due to some combination of these factors: (1) markets are partially efficient; (2) some institutions have access to broader information sources than others; and (3) some analysts are better arrangers of a mosaic of even fully public information.")Normand is now head of investment strategy at A$315 billion AustralianSuper.
