Market update: Optimistic trading continues, the Euro in yo-yo mode, another Brexit talks failure

1 Sep

by Mihály Tatár

Good Morning!

 

  • The optimistic rally continued on Thursday (SPX +0.57%, DAX +0.44%, Nikkei +0.04%, Shanghai +0.52%), with traders calculating that the ’goldilocks situation’ of the barely tightening Fed and ECB, coupled with strong global – and now we know US – growth, remains. Also, it gets little mentioning in the mainstream media, but Trump is in an intensive and so far adept crisis management mode ever since Harvey, touring the worst hit areas, and lawmakers who reject the debt ceiling increase with its ’emergency aid funding request’ better watch out in the 2018 mid-term elections.   The EURUSD had a rough a day – first it fell to 1.18 on the ECB verbal intervention (’Strong Euro is worrying a growing number of ECB policymakers’), only to bounce back to 1.19 on US Treasury Secretary Mnuchin talking about ’a weaker currency being somewhat better’. (Out of the two, the former is way more important, but traders were wary of today’s monthly employment report and next week’s fateful ECB rate decision).  In the meantime, another round of Brexit talks failed spectacularly (with the UK always coming up with fresh creative ideas to bypass the hardest issues and speed up the process, but the EU pushing them all back, pointing to the ’sequencing’ of the negotiations, resulting in traders calling Theresa May a ’Maybot’ for not changing tactics, or even speech lines.)  In the region, trading was quiet (EURHUF 306, EURPLN 4.25, EURRON 4.59 – the latter so far showing no reaction on the news that according to the Romanian press, the government is considering a 50 basis point tax on the whole banking sector).

 

  • In the latest show of force, South Korean and Japanese jets, together with US B-1B strategic bombers and F-35 fighters, began military drills over the peninsula. This will certainly not intimidate North Korea, in my opinion, but rather shows that even the most peaceful Asian governments now think that their population needs reassurance that they are protected. In the meantime, in Afghanistan, the Syria-style surge of American forces began (4.000 paratroopers, several squadrons of additional heavy bombers with much more ’relaxed’ rules of engagement).

 

  • As forecasted here earlier, the epic meltdown of the US Left continues with breathtaking speed, with even the European media taken aback by the latest developments (Los Angeles just changed ’Columbus Day’ to ’Indigenous Day’, let that sink in for a moment, and progressive pressure groups now demand to replace all Confederate-related school names – there are hundreds of them.) As said before, not even the majority of blacks support this cultural revolution, and we will learn in 2018 if the average American voter appreciates it. (The Trump base, in the meantime, just learned that the building of four Wall prototypes has begun.)

 

Have a nice day,

Mihály

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