Market update: Draghi knew what to say, last minute tax drama in the US

15 Dec

by Mihály Tatár


Good Morning!


  • To no surprise for regular readers, Draghi talked down any possibility of a premature rate hike after the ECB meeting (sending the EURUSD right back to 1.1770), and to strengthen the message, the council improved Eurozone growth forecasts (2018 +0.5% to 2.3%, 2019 +0.2% to 1.9%), while remaining pessimistic on inflation (even for 2020, the official expectation is 1.7% – now that is quite extreme, and would mean Japanification. But the ECB is clearly wary of an EURUSD over 1.20 with an impulsive credit tightening – and mind you, there is still no new German government.)  In a classic last-minute drama, Republican Senator Marc Rubio threatened to oppose the tax reform legislation – demanding larger child tax credit -, which the market didn’t take well (SPX -0.41%, DAX -0.44%, Nikkei -0.56%, Shanghai -0.93%), ignoring a much-better-than-expected US retail sales data (+0.8% M/M, Y/Y +5.8%, meaning that the Q4 USD GDP growth could approach 4%). (A nice way to economically collapse after the 2016 elections, if you ask me, – even Paul Krugman was talking about a ’global recession with no end in sight’.)   In the meantime, the Pakistani Rupee weakened to a fresh record low (110.10 per USD), ironically also helped by the IMF, which welcomed the ’necessary devaluation’ and recommended much stronger fiscal discipline. (The locals must be happy about the great news, especially being told in the summer that it would never come to this.)


  • IBM has launched its first quantum-computing services, to be tested by Daimler, Samsung, Barclays and JPMorgan. The new technology could eventually help solving difficult problems even for conventinal supercomputers – banks want it to experiment with it for trading strategies and mass portfolio calculations, while carmakers are interested in perfecting manufacturing processes and routing fleets of self-driving cars. (There are also rumors that the militaries of the US and China are also quite interested in this new field.)


  • Human Right Watch reported that China is building a gigantic biodata database from its 10-million Islamic Uyghur minority (from DNA to face mugshots and iris scans), regardless of age and backgound. The not-so-positively-inspiring development, of course, will eventually set a precedent, and we will see if Beijing will be as forgiving to terrorist supporters as EU capitals have been.


Have a nice day,



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