Market update: Traders patient with the US shutdown, Turkish forces enter Syria

22 Jan

by Mihály Tatár

 

Good Morning!

 

  • The initial reaction to the US government shutdown has been muted (SPX +0.44%, DAX +1.15% as of Friday, Nikkei -0.11%, Shanghai +0.81%, EURUSD 1.2230 – even with the SPD delegates narrowly supporting the new Grand Coalition in Germany -, US 10Y yield 2.66%, WTI 63.50, Brent 68.80 USD), as traders for now consider it as a short-term aberration. (Quite typically, the mainstream media talks about a ’blame game’ on who is responsible, suggesting its both sides  – I clearly remember that in 2013, under Obama, the narrative was that  in-opposition Republicans ’have taken the country hostage’.  Also, I suspect future history books will write about this event as the first time that immigration questions – the legalization of 690.000 people in a country of 320 million to be precise – were  considered so crucial by a party that it was worth shutting down the whole government, including military and welfare payments. Many are wondering what Democrats hope to accomplish with this – including the Washington Post, which can not be accused of liking Trump – as the political optics is terrible. Anyway, a longer than expected shutdown will be hard on investors’ nerves as it dampens the hopes for a massive infrastructure spending bill in the coming months.)

 

  • The Turkish Lira weakened further (USDTRY 3.85, approaching its record low against the Dollar) as Turkish armored divisions entered Syria after heavy bombardments, clashing with Kurdish YPG units. While Russia did not interfere and Erdogan’s deputy promised to keep Syria’s territorial integrity intact (talking about a 30 kilometer buffer zone, but the aim is clearly to kill as many YPG fighters as possible), geopolitical analysts are not optimistic about the political outcome of this operation – the Kurds are said to be already in talks with Assad (!) – and if the fighting  goes out of the control the end result might be the US turning decidedly against NATO member Turkey or an embarassing retreat from Ankara. (The German newspapers even call the operation ’Erdogan’s strategic mistake’, arguing that it may actually speed up the formation of a Kurdish state.)

 

  • In an interesting development, while we have been told for years that the automatization hurts the hard-to-adapt blue-collar male workforce, resulting in populism, the main study released by the World Economic Forum concludes that new technologies knock out more women from their jobs than men, and ’an immediate intervention’ is needed to avert a disaster. Personally I was sceptical about this story even when it was the other way round, but there is no reason to deny that changes are underway: Amazon just opened its first cashier-free store this Monday (buyers simply walk out and Amazon charges their Amazon accounts as if they used a virtual cart).

 

Have a nice week,

Mihály
 

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