Market update: US service sector growth hits 12-year-high, all eyes on the Saudi purge

6 Nov

by Mihály Tatár

 

Good Morning!

 

  • The slow-but-steady bull market continued (SPX +0.31%, DAX +0.28%, Nikkei +0.05%), after Friday’s data showing the US service sector index jumping to a 12-year high, also lifting the Dollar and metals further (EURUSD 1.16, Copper +1%, Iron Ore +5% – the latter also on forced Chinese production cuts). Naturally, with the chaotic news from Saudi Arabia (during the weekend purge, ministers, billionaires including the powerful Apple and Citibank stake owner Alwaleed bin Talal, several other princes, Saudi Aramco officials and the head of the national guard were ’taken care of’) oil prices remained well supported (WTI 55.80, Brent 62.40 USD). Geopolitical analysts don’t seem to be so optimistic as the Western financial newspapers (which cite young Saudis being happy with the ’crackdown on corruption’), warning that the width of the arrests shows that the dissent is much larger towards Mohammed bin Salman and his Vision 2030 than previously suspected.  In the meantime, the Turkish Lira crashed to a fresh record low (EURTRY 4.52, dropping 22% this year – it used to trade at 2.00 even during the Financial Crisis), after the official core inflation came out at a shocking 11.90%, showing the true extent of economic problems ahead. (One could joke that the ECB would be grateful for one-tenth of this inflation.)

 

  • Somewhat pushed aside by the Saudi developments, Mexico announced its biggest on-shore discovery in 15 years: The Ixachi-1 well that lies 72 kilometers South of Veracruz is believed to contain 1.5 billion (!) barrels of oil. The discovery follows another huge finding in July, by Premier Oil, a reservoir with an estimated 1.4 billion to 2 billion barrels in Mexican shallow waters. (Anybody remembers the excited media notion in 2008 that the world is running out of oil and the price will jump to 200 USD?)

 

  • In the banking sector, the heated debate whether digitalization will destroy most of the jobs in finances came back with force after the largest Scandinavian bank, Nordea, said it will cut 6.000 positions in a single automatian campaign. Interestingly, the market was not particularly happy (-9%), and even Bloomberg, normally the cheerleader of IT technologies, noted that the notion of bank tellers only doing repetitive and pattern-following tasks is pure fantasy, adding that the total number of banking jobs actually rose to a new record even in 2015.

 

Have a nice week,

Mihály

 

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