Market update: Fresh record highs in the US, post-war diplomacy starts on Syria

22 Nov

by Mihály Tatár


Good Morning!


  • As expected here last week, the pessimism was quite premature and stock markets rallied higher on Tuesday (SPX +0.65%, Dow +0.69%, Nasdaq +1.06%, all fresh record highs, while Asian indexes surpassed their 2007 peak, Nikkei +0.52%, Hang Seng +0.79%). Further helping the sentiment, the Chicago Fed activity index jumped to a 5Y high – this corresponds to a rapid, 3.6% annualized US growth forecast for the fourth quarter – underpinning commodities as well (WTI 57.70, Brent 63 USD, Copper +1.7%). Currency trading remained subdued: The EURUSD moved sideways along 1.1740, as Merkel and the German elites are now pressuring hard the SPD to make a U-turn and join a new Grand Coalition to ’avoid an unnecessary election’. (Schulz stated that ’I willl never join a government with Angela Merkel’ at the elections, but we will see. I suspect that if there will be new elections after all, German voters won’t be grateful to Merkel for giving in to the Greens in refugee policy – if anyone remembers, the 2015 open doors policy was sold as being a strictly temporary humanitarian project.) The Forint weakened further (EURHUF 314) after the Hungarian Central Bank (MNB) introduced fresh easing in the form of mortgage bond buying and unconditional IRS tenders for banks – nothing dramatic, but the message was clear that the easing policy remains and yields should come down further. (Even now, the Hungarian 5Y yield is at 1.14% – one can only hope that would-be pensioners didn’t have too many bonds in their portfolios.) The Turkish Lira crashed again – to 3.98 against the Dollar and 4.677 against the Euro, the latter is a 47% depreciation since January 2016 – as the Turkish central bank underwhelmingly tried to stabilize the Lira by raising the bank funding rate by 25 basis points (so far it wasn’t allowed to raise interest rates, worsening the situation).


  • The European Bank for Reconstruction and Development (EBRD) called Eastern Europe to change its growth model towards innovation, infrastructure and research, warning that regional expansion, mostly driven by low wages and by becoming part of the Western European manufacturing supply chain, are almost exhausted and won’t be enough going forward. Personally I have mixed feelings about these reports – on the one hand the problem is certainly there and has to be dealt with, but real innovation these days comes with such a brutal price tag that even the Eurozone is failing badly at it compared with the US and China. (I suppose the EBRD means high-tech innovation and not the latest Android application to navigate tourists between wellness centers.)


  • Russian President Vladimir Putin hosted Syrian leader Bashar al-Assad in Sochi, and later talked with US President Donald Trump on the phone, in what seems to be the first serious post-war diplomatic settlement process for Syria. It’s worth mentioning that after seven years of this brutal war, none of the Western goals materialized: Assad didn’t step down and one can imagine who will call the shots in territorial questions with Russian forces controlling the Mediterranean coastland and Iran the Lebanese and Iraqi border areas. The only real leverage the US has is to threaten to unleash the Saudi-Israeli alliance on Iran. (It is now an open secret that before the Saudi purge, the US Treasury opened a ’Terrorist Financing Targeting center’ in Ryadh, to give technical assistance in locating and freezing bank accounts. The Treasury is well-known to have close relationship with the CIA.)


Have a nice day,



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