Oil is up, gold is down. Stocks are firm and US yields are on the rise. In a word, reflation is under way!
We’ve seen fitful moves of this type several times this year, and all have been short-term in nature. I’d expect the same this time as well, though markets, as discounting mechanisms have a way of looking forward past the present mire when you least expect them, so be mindful.
Jobless claims could be the reality check that undermines the reflation trade in just over 30 minutes. Claims are expected steady around 626,00, while continuing claims are expected to top 5 mln for the first time.
The latest version of the bank bailout package is helping support markets near-term. Nationalization does not appear to be a central tenet, supporting the shares of the beaten down banks on the assumption that stockholders won’t be wiped out, at least in the very near-term.
USD/JPY has cleared 98.00 on the relative cheer and on strong technical momentum. 98.90 is next resistance, the 50% retracement of the drop from 110.70 to 87.11. EUR/JPY has been dragged along with USD/JPY and now trades at 125.70.
