Punch bowl maintained

The main story continues to be what central bankers are saying and whether investors believe them. It is evolving all the time and the more complicated it gets, the scarier it becomes. The FOMC is still the biggest actor and the minutes of its March meeting managed to sound dovish while leaving the door open to a rate hike as soon as June.  This, coupled with a string of mixed to soft economic data, has made some  US investors turn on its head the bon mot ‘good news from the economy is good and bad news even better as the FOMC will step in’.  Now, it may be that ‘good news’ from the FOMC means the economy is going bad! The minutes suggest that four or five ‘participants’ still favour a rate hike in June while ‘a couple’ want to delay until 2016. That leaves a solid block of ten or eleven, including Chair Yellen and her four fellow governors, looking at September at the earliest.

Meanwhile in Japan, the dissident Takahide Kiuchi’s modest ‘normalising’ proposals were buried by his eight colleagues at the BoJ. We shall have to wait to see if the Bank of England’s MPC are still unanimous or if Andy Haldane’s kite-flying on lowering Base Rate has won any support.

Weekly Irrational Movements in Prices (WIMPS)

Whatever investors think the central bankers will do next, many are clearly struggling with the increasing disconnect between price movements and fundamental macroeconomics and politics or even specific corporate earnings. So, rather than highlight the biggest movers why not the daftest? This could become a regular feature in Economic Insights but I am not yet sure I can aware prizes every week. There was certainly very stiff competition last week.

Ten year German bond yields: 0.16%, down 3 pips on week and 38 pips in 2015. Catch them before they go negative?

Ten-year Portuguese government bond yields: 1.64%, down 6 pips on week and 105 pips in 2015. Of course, that nice Mr Draghi will guarantee repayment in full?

Brent Crude: up 5.$% on week but only 1% in 2015. Will the Iran nukes deal affect oil supple? Or not? Who cares?

USD/RUB: down 6% on week and 12% in 2015. Hurry, hurry before all those bargains in Russia are snapped up?

Hang Seng: up 7.;9% on week, but ‘only’ 15.5% in 2015. What could go wrong trying to catch up with Shanghai? This week’s winner.

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