Market update: Massive 3% US growth resulted in the calmest October in history

2 Nov

by Mihály Tatár

 

Good Morning!

 

  • The sentiment remained positive on Wednesday (SPX +0.16%, DAX +1.78%, Nikkei +0.34%, Hang Seng -0.15%), and to put the recent moves into perspective, this October was the calmes stock markets month in history (from the first day of October, SPX rallied 3%, DAX 6%, and Chinese shares 5%, not bad for the traditionally most bearish month of the year. Of course, the news that the US annualized growth surged to 3% Q/Q, crushing the last remaining recession-callers, helped a lot.) According to the leaks, Trump will nominate Jerome Powell to replace Yellen at the Fed – this caused a bit of profit-taking in the USD and yields (EURUSD 1.1650, US 10Y yield 2.36%, USDHUF 266.60, USDPLN 3.634), as Powell is supposedly relatively dovish – but the focus remains firmly on the US tax reform (the talk is that the one-time tax on accumulated overseas company earnings will be 12% – auch!-, hitting about 3 trillion USD of company reserves). Regional curencies, naturally, had a slow day (EURHUF 310.70, EURPLN 4.235), while trading in oil was very active and two-way, with traders booking some gains after the good run (WTI 54.30, Brent 60.50 USD – showing the huge shift in sentiment, while the market chatters about a WTI of 60 USD, it emerged that Mexico just spent 1.25 billion USD on puts to protect exports under 50 USD). The least liked asset remained the Turkish Lira, after Turkey’s trade deficit jumped to USD 8 billion in September (that’s a whopping 12% of the GDP), and Turkish consumers increasing their debt at a 15% annual rate. The market was not happy the figures, especially as the Bahrain Dinar is also in trouble (with the central bank’s reserves having dropped 75% since their 2014 high, Bahrain is anxiously calling for help from Saudi Arabia and the UAE), and it looks like the region really needed a lasting oil price rally in 2018 to avoid a fiscal meltdown.

 

  • Bitcoin made another record high (6998 USD), on rumors that Amazon might soon accept Bitcoins for payment (the company has registered several webpages comitted to the crypto currency, but the details were not confirmed), and on the news that even Iran is ’preparing infrastructure’ regarding Bitcoins, to go around sanctions and SWIFT issues. (The latter should be rather a warning sign for Bitcoin traders – Washington won’t be happy.)

 

Have a nice day,

Mihály

 

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