Market update: Negative tax reform newslines put markets on hold, Gulf stocks keep falling

8 Nov

by Mihály Tatár

 

Good Morning!

 

  • As mentioned earlier, the real issue for the markets remains the US tax reform, and with the newsflow being negative yesterday – some Senate leaders were talking about ’postponing the implementation of the tax cuts by one year’ – traders turned wary immediately (SPX -0.02%, DAX -0.66%, Nikkei -0.10%, Hang Seng -0.12%, EURUSD bouncing back  from 1.1560 to 1.16). Especially the most sensitive financials were hit (Goldman Sachs -1.5%, JPMorgan -2.10%, Citi -1.6%), and the news was a good excuse to take some profit in oil (WTI 56.90, Brent 63.40 USD, Shell -0.70%, PetroChina -0.50%). Personally, I don’t think too much of this news item – Republicans are in no position to let this tax reform fail as Trump would blame their incompetence and campaign against them at the 2018 mid-term elections. With the Saudi drama, Gulf markets had another rough day (Kuwait’s stock exchange dropped 2.8%, Qatar’s 1.1%, Bahrain’s 1%, but the Saudi index remained protected, and only fell 0.7%), and investors weren’t exactly reassured by the leak that the Kingdom plans to confiscate some USD 800 billion from the country’s elite, and that Iran suddenly reshuffled its military leadership with more assertive commanders (if that is even possible).

 

  • In the region, trading remained quiet (EURHUF 311 – Hungarian retail sales jumping 6% Y/Y is barely a mentionable news these days, EURPLN 4.235), with the exception of the Romanian Leu (EURRON 4.637), which weakened to a 5-year-low after the central bank postponed raising rates despite growing inflation signs. (Given the rapid wage rises in several countries in the region, this may be a major trading theme in 2018.)

 

  • After all that hype about the German Energiewende, Siemens (up only 6% this year, underperforming the DAX by 10%) is planning to cut more than a thousand jobs in its power and gas division, talking about a global drop in global turbine demand (forecasted to plummet to 111 between 2018 and 2020 from 249 in 2011).

 

  • Veteran geopolitical strategist David Goldman notes that while the Western media focuses on the business and popularity dimension of the Saudi purge, non-Western world powers from China to Russia seem to be celebrating, and are talking about ’Saudi Arabia getting its first real government’. (For example, both Russia and China have been trying hard to stop rough Saudi princes from financing terrorist organizations in Asia, and the US had similar problems after 9/11). The quiet Israeli-Saudi alliance is also getting a much bigger attention, and the Israeli defense minister’s latest tweet (Lebanon=Hezbollah. Hezbollah=Iran. Lebanon =Iran.) was anything but hard to interpret.

 

Have a nice day,

Mihály

 

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