Market update: Traders fear US sanctions on China, Pakistan’s population just surpassed 207 million

5 Sep

by Mihály Tatár

Good Morning!

 

  • With the US on Labor day holiday, most markets traded in a slow fashion, and active traders focused on the Asian developments (DAX -0.33%, MIB -0.31%, Nikkei -0.50%, Shanghai +0.41%, EURUSD 1.19, EURHUF 306, EURPLN 4.24, Gold 1338, WTI 47.40, Brent 52.20 USD). The current main worry is that China will not go along with the joint US-South Korea-Japan push for ’maximum pressure’ on North Korea (which would mean a total blockade from oil shipments to business transactions), resulting in Trump going after the largest Chinese banks and export items. (As forecasted here at the beginning of the year, China vastly underestimated Trump’s election, and found itself between the rock and the hard place after the latest hydrogen bomb explosion, just before the critical Communist Party Congress in October. To say that the Chinese press is furious at Kim is an understatement.) The sentiment clearly reached a tipping point with this latest North Korean demonstration, prompting the South Korean media to demand the development of home-made nuclear weapons (thanks, Obama, this is your doing), and even Angela Merkel came forward and proposed the ’Iranian model’ as a solution (her advisors probably missed the ’Six power negotation’ process since 2003). The victim of the day were Bitcoin (-15% on the Chinese central bank deeming intial coin offerings and even conversions illegal), and the once mighty commodity trader Noble Group, which is in such a trouble now that the International Swaps and Derivatives Association (ISDA) had to start an investigation whether the company has technically defaulted (this decision will have will have far reaching consequences in the CDS market).

 

  • The diplomatic damage after the Trump speech on Afghanistan in the US – Pakistani relationship was so large that both sides had to walk back a bit (the US ’is not blaming Pakistan’, and envisions ’only economic role’ for India, while Islamabad promised ’even closer cooperation’ with the Pentagon), but it is not hard to forecast that when the US troop surge in Afghanistan is over, the going will get tough in the region. In the meantime, Pakistan finished the largest census in two decades (to get a feel of this project, 118.000 government officials flanked by 200.000 police and soldiers were needed). The initial results confirm what demographers have feared – the country’s population ballooned by 57% in 20 years to 207.8 million, with 54% of Pakistanis under 24 (!).

 

Have a nice day,

Mihály

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