Market update: North Korean test missile rattles markets, Amazon begins its siege of the supermarket industry

29 Aug

by Mihály Tatár

 

Good Morning!

 

  • Trading started in a slow fashion on Monday, with the market assessing the potentially 50-100 billion USD damage from Tropical Storm Harvey (this compares with Katrina’s 118 billion and Sandy’s 75 billion, showing the magnitude of the devastation), pushing Nymex gasoline prices even higher (+3% to 1.1779, as more than a million barrel of fuel-making capacity was knocked-off, and the amount of idle crude oil made traders to bail out of some longs (WTI 46.70, Brent 52 USD). Later the news hit the market that North Korea fired a ballistic missile over Japan, with the Japanese PM Abe calling the act ’unprecedented, grave and serious threat’. Trading turned defensive immediately (Nikkei -0.58%, South Korean Kospi -1.5%, Gold 1322 USD, EURCHF 1.14, S&P futures -0.52%), and as mentioned earlier, despite the optimistic analyst talk that exactly nothing will happen, geopolitical realities will force the US into finding a solution, in my opinion. (It will be pretty hard to convince Asian countries, that the US can defend them from China, if even Kim wins this game of chicken, not to mention Trump invested an enormous amount of political capital into this problem.)

 

  • Amazon didn’t waste time and spent its first day as the new owner of the iconic grocery chain Whole Foods by cutting prices up to 43%. This large-scale industrial experiment sent mental shockwaves through the markets this summer, and not only through the 800 billion USD supermarket industry – if the expansion is successful, it can be easily adapted to other economic segments as well and will be used to completely change the culture of shopping and supply management.

 

  • As forecasted here, the ’tough of line’ of Germany on Turkey never really materialized, to the point that even the German Left and the media is now extremely frustrated with Berlin’s policies – it actually gives more money to Turkey than before, which is a strange way to pressure a country. This should have been of little surprise, however – Erdogan is holding all the cards and with the number of refugees inceasing again (especially in Greece), the EU quietly chose the protection money.

 

  • Speaking of frustration, Israeli PM Netanyahu warned that if Iran is let to further expand in Syria, Israel will intervene and ’bomb the Syrian President Assad’s palace, among others’. This comes as the Revoulationary Guard and Hezbollah troops seems to be preparing for long term presence along the Syrian border, to the point of reportedly building ’administration centers and a missile factory’. Such a step would mark a fresh phase in the Syrian war, but it is unlikely to happen without Russian approval. In the meantime, Iraq retook the key city of Tal Afar from the rapidly collapsing ISIS, and despite the media hype, anti-US protests in Pakistan have been actually very muted since Trump accused the country of helping terrorism.

 

Have a nice day,

Mihály

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