Market update: Commodities rally further, Amazon dominates Thanksgiving sales

23 Nov

by Mihály Tatár

 

Good Morning!

 

  • Stock markets gradually slowed down as US traders left for their Thanksgiving holiday (SPX -0.08%, Nasdaq +0.07%, DAX -1.16%, Nikkei +0.48%, Hang Seng -0.06%), and after  the ’predictably unpredictable’ Fed meeting minutes, that showed ’a concern about soft inflation’ – yet calling for a December rate hike -, plus some mildly positive noises from German politics, the EURUSD bounced back to 1.1820. The strongest trading asset class remained commodities (WTI 57.90, Brent 63.15 USD, Copper +1.5%, Iron Ore +3%) – in the case of WTI, this is the highest price since mid-2015, as virtually every analyst expects an extension of production cuts at the Nov 30 OPEC meeting. The UK has cut its own growth forecast pretty dramatically (for 2017, from 2% to 1.5%, and even to 1.4% from 1.6% for 2018), but at the same time also announced a generous budget spending plan, with a large housebuilding programme and a tax cut for young homebuyers. GBP traders appreciated the fiscal stimulus effort by sending the GBPUSD to 1.3340 and the EURGBP to 0.8870, with everyone wondering why this idea wasn’t announced before the disastrous election.

 

  • The newsflow from Pakistan remains quite negative: Prime Minister Shahid Khaqan Abbasi was forced to take over the Finance Ministry from the ’fiscal wizard of Pakistan’, Ishaq Dar (who was hospitalized and was granted ’indefinite medical leave’). This news comes just as Islamabad is holding a roadshow to sell dollar debt, with the market already speculating that IMF support will be needed to stabilize Pakistan’s dangerous external position. (The country just borrowed another USD 500 million from China, to stop foreign reserves slipping to unexcusable levels.) It’s also worth mentioning that Dar was the main opposer of devaluing the Rupee, a long-time demand of the IMF. (The Karachi Stock Exchange is now trading at -16% YTD, which compares with a +27% rally in India).

 

  • E-commerce analysts are closely watching this year’s Thanksgiving, with online sales expected to rise by 14% in the US (to USD 107 billion) this season. Amazon is expected to capture about half of that total (!) with its aggressive pricing and shipping promotions. (Same-day and two-hour delivery is now quite common, killing off competition.)

 

Have a nice day,

Mihály

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