Market update: US economy surprises doubters, S&P a mere 1% from its record high

31 Aug

by Mihály Tatár

Good Morning!

 

  • As mentioned many times earlier, the majority of market participants – pressured by the permantently negative media newsflow on the US – had an unrealistically low opinion on the US economy. This was on open display on Wednesday, when analysts where shocked to discover that the US grew by 3% (Q/Q in the second quarter, instead of 2.6%), with personal consumption rising 3.3% and the job market adding a monster 237.000 jobs in August (according to ADP, this is not the NFP official data, that is due on Friday). The data, along with the speculation that Tropical Storm Harvey has put Trump’s opponents in a very unconfortable political situation regarding the debt ceiling (sabotaging the compromising process won’t go well with voters), helped assets higher (SPX +0.46%, Nasdaq +1.05%, DAX +0.47%, Nikkei +0.75%, EURUSD 1.1870, Gold back to 1300 USD and the US 10Y yield bouncing to 2.15% from the Asia war fears). The victim of the day was oil (WTI 45.60, Brent 50.60 USD, attributed to Harvey – while Nymex gasoline advanced almost 7%, with traders booking tankers to load European fuel to the US), and the Qatar Stock Exchange, which extended its losses to -20% from the beginning of the year as the economic isolation continues.

 

  • Not quite surprisingly, the mainstream media’s favorite Emmanuel Macron was forced to ask ’for the patience of voters’, as his approval rating crashed twice as fast as Trump’s (from 62% at the election to a mere 40% now), even surpassing that of president Hollande. To be fair, its never popular to sell a major labor market reform (planned for September), but Macron’s Eastern European Tour (’Stop sending over workers, they hurt our job market. Poland: No.’) showed that his victory was more out of fear of Le Pen than him being a political genius, in my personal opinion. The French stock exchange gave back about 7% since the post- election rally, which is about the same as the 8% correction in the DAX.

 

  • In the latest sign that digital and physical shopping is rapidly merging, PayPal is introducing credit cards. These offer 2% cash back on purchases, with the money appearing in the users’ online wallets. Paypal’s stock reached a fresh record high after the news (resulting in a whopping 57% rally this year), and it’s not hard to forecast that virtual-physical payment methods will put traditional banks under enormous pressure going forward.

 

Have a nice day,

Mihály

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