Back on (the same) track

July 1, 2019

–This weekend CNBC cited a report from JP Morgan saying that 80% of the stock market is on autopilot, as 60% is controlled by passive investing and 20% by quantitative strategies.  Perhaps, but today’s surge to new highs on the US/China ‘trade truce’ is anything but passive.  Safe havens are being swept aside.  However, Fed Fund contracts and near eurodollars are down only 2 to 2.5 bps, indicating little change in ease odds in spite of trade talks being back on track. 

–Aug crude oil is also at a new high above $60 as OPEC agreed to extend production cuts.  It’s economic vibrancy around the globe.  Except that China’s official and Caixin Mfg PMI reports both came in at 49.4.  Of course, with trade tensions as good as settled, those reports are now in the rearview mirror.  Today US ISM is expected 51.0 from 52.1 and the price index 53.0 from 53.2 last.

–Clarida spoke this morning in Helsinki, essentially giving the same speech as he has in the past on the Fed’s communication strategy review.  ‘Maybe they won’t notice, because I am in Helsinki.’  I guess the new communication guidelines include repetition. From the speech, “With the US economy operating at or close to maximum employment and price stability, now is an especially opportune time to conduct this review.  The unemployment rate is near a 50-year low and inflation is running close to our 2 percent objective.”  But r-star is low. So now is a good time to loosen policy…

Posted on July 1, 2019 at 4:47 am by alexmanzara · Permalink
In: Eurodollar Options

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