Market update: No drama at Jackson Hole, tropical storm Harvey hits Texas, trade worries return

28 Aug

by Mihály Tatár


Good Morning!


  • The Jackson Hole conference ended without major surprises (SPX +0.17%, DAX -0.11%, Nikkei -0.14%), with Draghi and Yellen barely talking about monetary policy or currencies (causing a stop-loss run in the EURUSD over 1.19), and spent the time by critizing the Trump agenda instead (Draghi warning against protectionism and Yellen arguing against financial deregulation – after these speeches, nobody thinks Yellen can stay another term, especially as Gary Cohn declined the rumour that he ever wanted to resign). With this, the market attention turned to Tropical Storm Harvey, which hit Texas and its refining centers heavily, pushing up Nymex gasoline prices by 6% (to a 7-months-high), and kept supporting oil prices (WTI 48, Brent 52.80 USD). In the region, the Hungary outlook upgrade of S&P from stable to positive was a pleasant surprise, but since Thursday’s verbal intervention, traders care much more about what the Hungarian Central Bank (MNB) can or can not do in the Forint market (EURHUF 304.20), resulting in little immediate reaction. The week will be data heavy (US GDP, monthly employment figures, German and all the other Eurozone CPI numbers released), and the market will increasingly focus on the US debt ceiling / tax reform issues. Looking at the facts on the ground (the Republican tax plan looks very serious, unlike the emotional Obamacare-repeal tickets, and they have majority in both houses of Congress), analysts seem to be overly pessimistic to me – but admittedly, no-one living has ever seen a power struggle of this magnitude before in the US. (In a new low from the only superpower, it is rumoured that Trump is increasingly frustrated with Rex Tillerson – he sounded weak and dovish after the latest North Korean provocation this weekend – and Democrats went in full ’statue politics’, pushing to remove the statue of Christopher Columbus from New York (!!) – I guess he is also considered alt-right these days.)


  • Not helping Draghi’s effort about the dynamic, open, global economy, France and Germany announced that they will present a concrete plan in mid-September to tax Internet giants like Google, Apple and Facebook. (The argument that these companies should pay at least as much taxes as European corporates sounds rational, but it will call for immediate trade policy retaliation, and lets be honest, there are no similar European companies to begin with.) Beijing reacted angrily to Bannon’s ’China is the single largest threat to the US economy’ comments, talking about ’sanction countermeasures like curbing imports from the US and selling USD assets’, in government newspapers. (Somewhat funnily, these would result in a much weaker Dollar, and a contracting trade surplus for China – exactly what Trump wants.)


Have a nice week,


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