SocGen: Suddenly, The Market Is Gripped In Political And Economic Nervousness

Tyler Durden's picture

In his overnight FX note, SocGen's Kit Juckes explains why a certain foreboding feeling of political and economic nervousness abounds in market, which continue to ignore the near all-time highs in the S&P, and instead can't quite shake off the sense that something is wrong, starting with US car sales data which don't usually make big waves, but an underwhelming performance was enough to drive Treasury yields down again and concerns that the US economy is losing momentum have returned, putting a dampener on risk sentiment generally.

Juckes adds that the planned meeting on Friday/Saturday between Presidents Trump and Xi Jinping is cited by newswires as another reason for nervousness in Asian markets. The upshot is that the yen's at the top of the global FX charts this morning, ahead of the dollar and then everything else, with AUD, NZD and KRW all down 0.5% against the dollar in Asia. The rand meanwhile, is down 1% overnight after S&P downgraded South Africa's foreign currency borrowing rating to BB+ from BBB-. .

US domestic car sales - are the wheels coming off?

It's not obvious how the market escapes this nervous mood ahead of Friday's payroll data, but if we end up with an even longer period of range-bound US yields then ultimately, the urge to find yield will overpower other market emotions. It's mostly a question of biding time this week however.

There's a certain amount of nervousness around ahead of the French presidential election too, despite opinion polls suggesting it's a foregone conclusion. With under three weeks to go until the first round vote, Emmanuel Macron and Marine Le Pen remain comfortably ahead of the pack but a 27bp Bund yield tells us something about the mood and the OAT/Bund spread is back out to 67bp too, while the BTP/Bund spread is out at 203bp and the drop in Bund yields means that they are keeping up with Treasuries, and the Tsy/Bund spread is still comfortably above 200bp, providing Euro bulls with no encouragement yet.

BTP/Bund spread is above 200bp, anchoring the Euro

The temptation is to think that French pre-election nerves are just that, and the opinion polls can't be THAT wrong. On that basis, these would be good levels to buy EUR/USD and also, EUR/GBP. Maybe the better part of valour is to go short GBP/CHF at 1.2475. The UK manufacturing PMI was a little softer, and construction PMI data are due today. The basic underlying sterling story though, is still one of a very cheap currency supported (or rather, not supported) by absurdly low real yields.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Bay of Pigs's picture

Suddenly? More like a slow moving, eight year train wreck.

Arnold's picture

It's all relative.


Mr Blue's picture
Mr Blue (not verified) Arnold Apr 4, 2017 6:48 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

JRobby's picture
Political And Economic Nervousness + Algos = No Market, NONE!
Sky flyer's picture

Bullish. Next article of doom please.

Ghordius's picture

re Trump/Xi meeting: up to now, every meeting with Trump was cordial, wasn't it?

re French Elections: "The temptation is to think that French pre-election nerves are just that, and the opinion polls can't be THAT wrong."

correct, polls can't be that wrong. the recent Dutch and German elections showed that continental europeans seem to say the truth, when polled (and isn't that interesting all for itself? that Americans and Brits voted differently from what they were willing to say to pollsters? I know, it's only one way of seeing it, but I find it an interesting one)

but elections are always an uncertain affair. see how fast and hard Fillon was taken down by scandals

candidates can slip, die, utter something really stupid, whatever

(here one of the real problems of today: from a "market's perspective", elections, particularly if done well, fair, etc... are always something... fretting, negative, etc.)

Atomizer's picture

Economy 101, supply and demand. 

overmedicatedundersexed's picture

the crap train of wall street keeps rolling on...JU's keep stacking and getting hideaway tel aviv case some goy screws it up.

new game's picture

got gaza? lol.

prefer grassy knoll with 24" poured wall construction with turret openings 360...

and of course a red white and blue flag blowing in the breeze.


Atomizer's picture

Channel stuff me bitchez with a rebate of $9,000 to buy a car. Legacy costs are catching up with them. They created this mess, they own the problem without any taxpayer bailout. You took out credit to improve efficiency and built cars without indexing actual study of the demand matrix. Fuck you sucker's. 

Fantasy Free Economics's picture

I have been making the case that the stock market will will crash after one or two things happen. The political climate will change and the Federal Reserve will have to accomodate a new political agenda. Or, the economy will collapse beneath us due to the gross misallocation of resources caused by stimulus, which is theft. Central banks have all of the money in the world and can buy up any excess supply of equities but only if there is the right political incentive in place.

I am reposting an artticle that tells it like it is.

This was deemed too harsh when it was written but today folks are waking up to the harsh reality behind economic realities.

James Quillian

Fantasy Free Economics


barysenter's picture

To be lied to in French, press SocGen. To be lied to in English, stay on the line. Estimated wait time is... free minutes. That's the ticket! I'm Tommy Flanagan, and I'm an expert financial advisor... I'm Loyd's *top* expert. Yeah, that's the ticket!

Anteater's picture

WADC (IPA) - In his overnight Twitter feed, President Donald Trump acknowledged public and private fears that his new healthcare plan, MACA, a plan which is prevented by international tradename laws from being called 'TrumpCare'(tm), is likely to further suck all the liquidity out of any Fed prime rate hiked 'continued recovery', and instead continue to plow the American Ship of State into subprime netherworlds never before plumbed. The President expressed hope that some special event, 'a New 9/11', in his strategy advisor's phrasing, would galvanize the American people around the  MACA Plan to throw 40 million 20's-somethings and 50's-somethings to the wolves. Earlier today, an unidentified high-level senior advisor at the CIA has stepped forward to claim that the White House had requested a secret dossier of 'the best Muslim patsies that we have as assets in the US, at present.' No date has been identified for the special event, although many are suggesting Easter would be the most 'productive', and possibly nearby to a cathedral, as a 'two-fer.'