Market update: Trump receiving a Ceasar’s welcome in China, two UK ministers gone in two weeks

9 Nov

by Mihály Tatár

 

Good Morning!

 

  • In absence of major data releases, trading remained muted on Wednesday (SPX +0.14%, Dow +0.03%, both fresh record highs by the way, DAX +0.02%, Nikkei -0.28%, EURUSD 1.16), and traders instead focused on Trump’s historical visit to China: The US President received a Ceasar’s welcome, surpassing even the wildest analyst expectations (Trump is the first foreigner leader, who was allowed to dine in the sacred-for-the-Chinese Forbidden City, and knowing his taste for Gold, he was shown the original emperor treasure). Trump wasted no time however, to talk about the ’huge annual trade deficit with China, a number beyond anything than anyone would understand’, but directed the blame towards previous US administrations, who ’let it out of hand’. The market  remained wary of any news regarding North Korea, and defensive assets rallied (Gold 1283 USD, US 10Y yield 2.32%), and one knows the US delegation is serious, when, somewhat funnily, key US officials started talking about the ’Indo-Pacific’ region instead of ’Asia-Pacific’.  In the meantime, Middle Eastern stock exchanges bounced a bit (Bahrain +1.1%, Kuwait +0.7%, Egypt +1.16%, Saudi unchanged), with investors seeing the second-iteration results of the purge (for example, the arrested Prince bin Talal quietly sold off his 1.5 billion USD stake in 21st Century Fox). While Pound traders are preoccupied with the Bank of England at the moment (GBPUSD 1.3130), it won’t be without consequences that the May government just lost its second key minister within two weeks (first the Defense Secretary and now International Development Secretary Priti Patel), reinforcing the market view that with this leadership, no orderly Brexit is possible, and something has to give. (Sensing this, German officials keep recommending Britain to reverse the process).

 

  • Ericsson lost 4.6% in two days (down 56% since mid-2015), as further longtime executives have left the company and the management asked for ’more patience’ on profitability (never a good move). Investors have been quite sceptical about the European telecom sector (the European telecom ETF lost 36% in 2 years, compare this with DAX), as it is hard to see how the usual cutting & restructuring campaigns will help against Huawei, for example. (Credit agencies S&P and Moodys were so unnerved that they both cut Ericsson to junk, in fact.)

 

  • The Washington Post – the newspaper which can hardly be accused of liking Donald Trump -, warns that despite the picture one can gain from the media, Trump would win the elections again if they were held today: The latest Washington Post-ABC poll shows that Trump’s base is still intact, while Clinton’s popularity actually dropped even more. As mentioned earlier, in my view, Trump voters only care about immigration, and the undecided voters are much less hostile to the tax reform than the mainstream media, to say at least. The collapsing of the Democratic Party – forecasted here at the beginning of the year – also continued, with former Democratic Party boss Donna Brazil accusing Clinton of rigging the interparty election.

 

Have a nice day,

Mihály

 

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