Market update: Democrats retreat, stocks and oil rally, the US introduces the first Trump tariffs

23 Jan

by Mihály Tatár

Good Morning!


  • Well, that was quick: Feeling the hostile popular opinion and seeing the brutal Republican TV spots about illegal immigrants killing policemen, Democrats gave in and agreed to vote to end the shutdown until the 8th of February, in return of nothing. Stock markets immediately rallied (SPX +0.81%, a fresh record high of course, Nikkei +1.29%, the highest level since 1991, Shanghai +0.53%, making back the 2015 collapse-panic losses). Currency markets cared little with the approaching ECB rate decision on Thursday (EURUSD 1.2260, USDJPY 110.80, EURHUF 309.50, EURPLN 4.168), while oil markets appreciated Russia and OPEC talking about keeping the output cuts until the end of the year and even keep some of them in 2019 (WTI 64, Brent 69.40 USD). Interestingly, professional opinion seems to be very diverging again on the direction of the prices – BBL Commodities, one of the largest oil hedge fund, believes Brent will run up to 80 USD as ’the market is vastly over- estimating the near term inventory buffer’ (they are only bearish from 2020, when they expect electric cars to turn into an existential threat to oil), while several veteran analysts like John Kemp warning that the long positioning in oil became extremely overcrowded, with hedge funds holding 10 long positions for every short one. In an important development, the US just introduced new tariffs on solar equipment (30%) and washing machines (50%), creating a media rage storm (’will result in a trade war’, ’it is useless anyway’, it is a  ’loss for consumers’). It’s worth mentioning, however, that looking at the two products, this was clearly a message to China and South Korea before the Davos talks, and by the way, the first solar tariff was introduced by Obama in 2012. Also, the background is that global and US growth is accelerating rapidly, by now even according to the IMF: World expansion is forecasted to reach 3.9% this year and next, the fastest since 2011 when the globe was bouncing back from the financial crisis. It seems that tax reforms are good for the US economy after all, as the organization upgraded its US growth forecast from 2.3% to 2.7% as well.


  • As forecasted here last year, Bitcoin kept having a hard time (-14% to 10,300 USD) with even the European Securities and Market Authority now targeting crypto derivate trading and Asian authorities becoming extremely hostile to it (the South Korean Prime Minister said ’it could cause kids to get into crimes such as drug trafficing or pyramid schemes’, huh, good luck from here). Several respected technical analysts now call Bitcoin the ’greatest bubble of all time’, as it rallied from 6 cents in 2010 to 19,500 Dollars by the end of 2017 (32 million%).


Have a nice day,



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