Market update: Tech selling continues, prime minister of Bavaria forced to step aside

5 Dec

by Mihály Tatár

 

Good Morning!

 

  • The rotation theme came back with force on Monday, with investors selling tax reform neutral tech stocks further  (Google -1.30%, Facebook -1.80%,  Amazon -2.44%,  Microsoft -3.8%, Paypal -5.7%), favoring lower-tax-reinforced retail, manufacturing and less-regulated financial shares instead (Macy’s+7%, Home Depot +2.5%, Citi +2.2%, Wells Fargo +2.1%), with the S&P ending at -0.11%. (The EU finance ministers will meet today to discuss the US tax reform. The anxious lamentation – some of them are talking about a ’violation of global trade rules’ and a ’shock to the constructive equilibria in the world’, gives away a lot about this most hated tax cut in history. In another political Trump victory, the US supreme court has let the travel ban – on Iran, Libya, Yemen, Syria, Somalia, Chad – take full effect.)  Outside of the US, trading was quite mixed (DAX +1.53% as the SPD seemed to talk itself into a coalition with Merkel, Nikkei -0.37%, Shanghai +0.56%), and oil traders starting to lock in November’s profits (WTI 57.40, Brent 62.40 USD).

 

  • The market noticed that Rosneft has just racked up a record, more than 17 billion USD worth of debt (thats more than in 2016 and in 2015 combined), as the US Treasury is preparing to extend penalties on Russian debt issuance. (The news that Russia is selling massive amounts of oil to North Korea, to offset US-Chinese sanctions, probably won’t help the matter).

 

  • Venezulean President Nicolas Maduro’s announcement, that the Latin American country will issue a cryptocurrency, called Petro, to overcome the US ’financial blockade’, has started to ring bells in Washington and in the EU, to no surprise for regular readers. (There is a similar Russian plan against the constant threat of being cut off from the SWIFT payment network. Last week Sberbank conducted its first blockchain test transaction with Alfa-Bank.)  As said before, with the US set to lose the most, a campaign for cryptocurrency regulation will probably come up in 2018.

 

  • As forecasted here in 2015, Merkel’s refugee decision keeps coming back to haunt German politics: Just as Horst Seehofer, the leader of CSU was forced to step aside as the prime minister of Bavaria to be replaced with fierce refugee critic Markus Soeder, weakening Merkel’s political position further, a classified German government report was leaked estimating that more than six million migrants are preparing in the Mediterranean countries to cross into Europe. (This is not even a radical forecast, just remember that Nigeria’s population will grow to 400 million in the next decades, for example.) As usual, the media reaction was that Europe should accept the ’inevitable’ and embrace mass immigration (Huh? I guess today’s Western journalists don’t learn about the Iron Curtain in school), altough even the pro-pro-pro immigration Washington Post mentioned the inconvenient fact, that, currently, while Brussels fantasizes about the common EU army, 30-40% of the Western military manpower is being used for the mere patrolling of the streets in large cities. (French generals now regularly complain that their artillery engineers are standing before Christmas shops as riflemen, skipping military drills.)

 

Have a nice day,

Mihály

 

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