Market update: New US records as Apple brings home the money, EU car sales at 10Y high

18 Jan

by Mihály Tatár

Good Morning!

 

  • Trading finished in a mixed fashion on Wednesday: Helped by the data showing the US industrial production surging the most since 2012 and Apple talking about bringing back hundreds of billions of overseas dollars while paying 38 billion USD in extra taxes and creating 20,000 new jobs – but hey, the Trump tax reform was such a mistake, you know –  US indexes rose to fresh record highs (SPX +0.94%, Nasdaq +1.03%). European traders remained wary of the German political mess (DAX -0.47%, CAC -0.36%), while Asian investors waited for the Chinese GDP data (were they ever allowed to be bad?) and fresh hints of the Bank of Japan (Shanghai +0.16%, Nikkei -0.44%). As forecasted here, the ECB didn’t find the Euro appreciation funny and verbally intervened (Vice President Constancio talked about ’risk of unwarranted euro strength’ which ’don’t reflect fundamentals’, Bank of Austria governor and Council member Nowotny called the Euro rise ’not helpful’), pushing the EURUSD lower to 1.2165. (Things will be interesting from here: As mentioned earlier, the market amassed a historical record high position in Euro longs.) Oil prices, again, did little (WTI 64, Brent 69.30 USD), while the massacre continued in crypto currencies: Bitcoin at one point crashed to as low as 9200 USD, prompting the Internet to argue that ’finally it’s cheap, buy it until you can’. In my personal opinion, the last two weeks confirmed the main problem with cryptos detailed here last year: Despite the economist definition of money (parties agree to transact in it, and so on), the real power behind a money is that people with guns can make you accept it. (Usually the government, or even an army, as we have seen with ISIS). The value of the Dollar can’t fall 40% in two weeks because a certain capital city with 12 fleets won’t tolerate it – but nothing protects crypto investors, who are seen by tax and monetary authorities as hostile agents. (That is why the excited crypto investors are usually big world-government and post-nationalism fans at the same time. They should take out a map.)

 

  • Confirming the economic expansion, European car sales reached a 10-year-high (+3.3% Y/Y, to 15.6 mio vehicles, it seems the news about the death of gasoline are a bit overdone). The detailed stastistics show a healthy underlying picture as well (SUVs from Peuget and Renault, Alfa Romeos and Toyotas were especially in demand). Volkswagen seems to have used Berlin’s political protection quite well, and its global deliveries rose to a fresh record high (+4.3% to 10.7 mio vehicles in 2017), with a 5% expansion in China (4.2 mio vehicles of the total!), double digit gains in Russia and Brazil, but only 1.4% growth in Europe. Typically, the UK has  been the only drag on the numbers –  sales fell 5.7% in 2017 with households minding their budgets before Brexit.

 

  • While Italy’s election now seems to be a market non-event compared to the ’existential’ EU elections of 2017, there are interesting developments happening under the surface: Both of the Left and the Right seems to have shelved the promise to leave the Euro, but they are more Eurosceptic and anti-Brussels than ever. (This should not be a surprise – despite the media victory tours, Italian output is still 6% below the pre-Lehman peak.) The large right-wing coalition of Forza Italia is polling at 38% now, openly talking about a sharp rise in public spending over the EU limits and ’preserving the white race from mass migration to Europe’. (And these are the serious guys, unlike the Five Star Movement that now polls at 28%). As analysts note, the Brussels-conform Matteo Renzi and the current Gentiloni government achieved little to campaign with – unless you consider the ECB saving Italian banks and weakening the Euro a reform, and, somewhat funnily, these days even Berlusconi campaigns with a much lower flat tax to restart the economy. (Berlin and Paris will be super happy.)

 

 

Have a nice day,

Mihály

 

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