We noted Oct/25 that the UK desk anchor set earlier would remain in place; that is, observers would continue to underestimate real-sector results. We were mistaken; manufacturing and services PMI prints and industrial production did not cooperate.
Change of plan? No. Some anchors need to be re-set when they fail. Others just slip a tad. We will let this one be.
From late June we have had a plan for trading the UK. Those clients who have adhered to our general guidance have done reasonably well; nothing spectacular, but better than a stick in the eye. Naturally we did not expect absolute vigor or anything of the sort, simply something more than was priced in – all that counts.
Therefore, from that beginning (6/27) we knew the course-of-least resistance for the term structure would be wider because 1) we expected additional Bk of England firing (or the view for such an event), because 2) we expected further flight to sanctuary (E-Z) and because 3) we knew that most models had excessive weakness built in, this seemed an opportunity.
Sure enough, the spread expanded nicely; it has now come in a tad of course but is nowhere near entry levels.
Yet be aware of a new retardant to world growth - that would be recent US election results. The event of Nov/6 will have a near-immediate impact on both US discretionary appetite, and on US job creation. To the extent these in turn will impact the UK, they will impede any progress just ahead.
Robert Craven
Change of plan? No. Some anchors need to be re-set when they fail. Others just slip a tad. We will let this one be.
From late June we have had a plan for trading the UK. Those clients who have adhered to our general guidance have done reasonably well; nothing spectacular, but better than a stick in the eye. Naturally we did not expect absolute vigor or anything of the sort, simply something more than was priced in – all that counts.
Therefore, from that beginning (6/27) we knew the course-of-least resistance for the term structure would be wider because 1) we expected additional Bk of England firing (or the view for such an event), because 2) we expected further flight to sanctuary (E-Z) and because 3) we knew that most models had excessive weakness built in, this seemed an opportunity.
Sure enough, the spread expanded nicely; it has now come in a tad of course but is nowhere near entry levels.
Yet be aware of a new retardant to world growth - that would be recent US election results. The event of Nov/6 will have a near-immediate impact on both US discretionary appetite, and on US job creation. To the extent these in turn will impact the UK, they will impede any progress just ahead.
Robert Craven
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