Market update: Oil prices push deep into the 60 USD zone, ECB rages against Bitcoin

4 Jan

by Mihály Tatár


Good Morning!


  • Investors have nothing to complain about so far in 2018, with the stock market rally marching forward on Wednesday (SPX +0.64%, Nasdaq +0.84%, new records of course even with Intel dropping 3.5% on the security bug crisis, DAX +0.83% finally helped by the Euro easing to 1.20 against the Dollar, Nikkei +3.07%, Shanghai +0.52%). In my personal opinion – having been consistently bullish in the last several years – we are now entering the final, ’overshoot’ phase of the long rally since 2009. I don’t expect a total collapse many seem   to do – come on, global growth is 4%, the US manufacturing index hit a 14-year-high yesterday with German unemployment just dropping to a fresh record low -, but a healthy correction is long overdue. (Admiteddly, after this monster one-way rally, even a not really substantial 20% drop will  look like a collapse.) The near total correlation of economically unrelated stocks and assets will probably shift into a more selective trading. (Translation: Some irrationally overpriced companies and failing countries won’t make it into the new trading style.)  Oil prices pushed higher as well (WTI 62.10, Brent 68.20 USD, with oil stocks following,  Exxon +3.4%, Total +1.10%, Shell +2.10%) with analysts switching from being sceptical to being nervous – veteran oil analyst John Kemp, for example, warned that OPEC is risking tightening the market too much, encouring the acceleration of US shale production. (By now, both EIA and OPEC data shows that the oil oversupply narrowed significantly.) Personally, my view did not change from 2015: Prices under 40 and over 70 USD violates the interests of major players, the only change being that the buffer to slow down a spike – think of a geopolitical flare up during 2018 in Asia or in the Middle East – is much thinner.


  • The head of the Iranian Revolutionary Guard announced the end of the protests, with the ’troublemakers having been arrested’. Indeed, participation at the rallies has dropped – there were several times more troops and counter- demonstrators waiting than actual protesters in Teheran, for example – , but the crisis is far from over: As geopolitical analysts note, Iran’s economic situation is actually much worse than that of the more closely followed Pakistan’s and Turkey’s: Inflation is 11%, the Rial’s black market exchange rate declined from 36,000 per Dollar to 42,000 in one year, young unemployment is near 30%, water shortages are everyday occurences after decades of infrastructure mismanagement, and on top of that, Teheran is financing several wars at once (Syria, Yemen, Hezbollah-actions, consuming an estimated yearly 12 billion USD).


  • In a further sign that central banks gradually start to hate Bitcoin, ECB governing council member Nowotny labelled the cryptocurrency ’nothing else than a money laundering tool’ on Wednesday, recommending that it should be taxed and the identities of the buyers and sellers in each transaction should be released. Somewhat amusingly, he also added that there is no point in stopping printing the 500-euro-notes and enact tough regulation to fight money laundering, only to watch everyone using Bitcoin.


Have a nice day,



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