Market update: Trump-Democrats pact surprises the market, Hurricane Irma and the ECB meeting loom

7 Sep

by Mihály Tatár

Good Morning!

 

  • Genuinely surprising the markets and the media – and freaking out the Republican leadership -, Trump suddenly sided with the Democrats and agreed to the a 3-months temporary extension (until 15/Dec) of the debt ceiling. (As forecasted here after the first failed Obamacare repeal, Trump is now going after the unloyal and generally useless Republican leaders. The aim was to deliver maximal humiliation: Trump referred to the Democratic congressional leaders as ’Chuck and Nancy’, and openly supported a Democrat politician in his reelection campaign in North Dakota against his Republican opponent). At the first glance, markets were pretty unsure what to do (SPX +0.31%, DAX +0.75%, Nikkei +0.20%, Shanghai +0.05%, EURUSD 1.1920), especially as the Fed’s hawkish Stanley Fischer suddenly resigned (cruel traders joked that he left to look for inflation – he was the last believer of the classic Fed models), Hurricane Irma is approaching Florida (threatening one of the world’s largest producer of tomatoes, oranges and sugarcane), and as the critical ECB rate decision meeting day finally arrived. Since the leaks, no-one expects a too specific announcement from Draghi, but his comments on the speed of tapering and on the Euro strength (up 15% against the Dollar since January) will be very closely watched, and the ECB has a track record of surprising communication flip-flops.

 

  • Geopolitical analysts note that the Russian Northern Sea Route – with ice levels reaching record low levels thanks to global warming – has become perfect for shipping, and indeed, almost 100 vessels have been moving through in the last few weeks (most of them on the behalf of Gazprom and Novatek). South Korea and China seems to be very interested, with ambitions of turning the passage into a global trade route bypassing the Indian Ocean and the Suez Canal.

 

  • It’s always worth to keep an eye on Amazon: The giant is opening its first high tech, 80.000 square meter ’fulfillment center’ (basically logistical center) in New York, with many more coming online worldwide. (Only in the US, 21 new warehouses were announced so far this year – traditional supermarket chains better come up with ideas).

 

  • While understandably the North Korean hydrogen bomb detonation stole the show from the BRIC conference, it was actually quite exciting in itself: Putin revealed a ’fair multipolar world’ concept, in which oil contracts will be traded using oil, gold and yuan, instead of Dollars. (This is of course a very old idea, but from the looks of it, the plans are now very concrete for the coming years.) Also, in a shocking turnabout, the members criticized Pakistan for its support of terrorist networks, further isolating Islamabad. (As a sidenote on North Korea: You know that the times have suddenly changed when US arms experts say things like this in the media: ’Our nuclear weapons and command and control centers are designed to operate in a nuclear war environment, not just some puny EMP blast’.)

 

Have a nice day,

Mihály

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