Global stocks, bond yields and commodities all jumped higher on Thursday while the dollar plunge continued, as investors suddenly seemed to forget the inflation fears blamed for a brutal market sell-off in recent weeks.
Last week’s volocaust is a fading, distant memory, and this morning global stocks – albeit without China which is on weekly holiday for the Lunar New Year – continue their relentless surge with the Dow set to open back over 25,000, even as yields rise and the 10Y is fast approaching 3.00%, thanks to a plunging dollar which fell for a fifth day, keeping financial condition well lubricated. As a result, global stocks and futures are a sea of green this morning despite growing inflationary noise in the background.
Commenting on the overnight price action, one major bank said it can be briefly summarized as: bearish USD, bearish fixed income, bullish equities, bullish oil. As the trader notes, “We’ve definitely been here before – in fact, it was the consensus trade for 2018 until the recent market rout questioned the move.” Therefore there’s certainly a sense of déjà vu as the paradoxical moves in markets continue at least until inflation fears hit the next tipping point and launch the next equity market selloff.
In the meantime, one can scratch their heads: the bank adds that “the bewildering nature of recent price action has become a somewhat familiar feature of markets lately.”
One needs just three charts to understand what is going on on most days: futures are up, as they are this morning…
… even if yields are sharply higher, which they also are as the 10Y rises above 2.93%…
… as long as the dollar is tumbling, and financial conditions are looser.
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