Fear Factor returns to markets - ING

In the view of Robert Carnell, Chief Economist Head of Research, Asia-Pacific at ING, “plucky market resolve and a rose-tinted outlook seem to be giving way, at least until the next dollop of central bank "valium" calms nerves again.”

Key Quotes:

“Another turn on the trade war, this time negative, weak China data, curve inversion, but the only real change is one of attitude. 

I've talked at length about yield curve inversion in this note in the past, noting that if we were to adjust it for central bank asset purchases, which total over $11tr, then it would likely not be all that flat at all.

But whether it has inverted in "real" terms or not, and the 2s10s slope is now virtually flat if not actually inverted, recent moves do indicate a distinct flattening. In my view, that isn't out of whack with what is going on in the wider world.

For sure, the US economy doesn't quite adhere to this story, with core inflation nosing higher, and a still-strong labour market.

But indicators of business investment, like core goods shipments and inventories, haven't looked all that perky for some time, and it is a fair bet that the trade war is crimping business confidence, and at least, delaying some investment plans for lack of a clear route forward.“


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