Market update: Davos waits for Trump, the USD hits a 3-year-low

24 Jan

by Mihály Tatár

 

Good Morning!

 

  • Stock traders slowed down as the global business elite waited warily for Trump’s speech in Davos (SPX +0.22%, DAX +0.71%, Nikkei -0.74%, Shanghai +0.01%), passing time with not too relevant, self-reassuring, pro-globalization speeches (Germans: ’we can learn from history that protectionism doesn’t work in the end’, Chinese: ’don’t worry, we will allow more outside competition’, this boring show won’t do much to appease the angry US or slow the Asian arms race, to name just two of the most pressing issues). The Dollar, for its part, dropped to a 3-year-low against other currencies, on the market talk that Trump’s tariff campaign is actually only a start of a long process to shrink the huge current account deficit of the US – and for that, a further weakening of the USD will be necessary (EURUSD 1.2330 – lets see tomorrow if the ECB is happy, USDGBP 1.4050, USDJPY 109.80, USDHUF 251, USDPLN 3.38, USDTHB 31.70). Supported by the weaker Dollar, oil prices started to test the key 64 USD level in the WTI for the second time (WTI 64.50, Brent 70 USD), with Gold also trading higher (1342 USD).

 

  • As mentioned last year, the dramatic collapse of the once iconic manufacturing and finance giant General Electric continues, having lost 50% of its share value since mid 2016 (or 70% since 2000), with the company, employing 300,000 people, now considering breaking itself apart.

 

  • While Brexit-related political news continue to be surrealistic and barely readable – the latest scandal is the Scott National Party ’eradicating’ UK flags from government buildings and Brussels, cleverly, using Ireland to extract more concessions from May -, in the background, the preparations for a financial hard Brexit continue: Citigroup said its post-Brexit trading hub in Frankfurt will be operational by year-end with a new staff of 150 (on top of the 350 employees already working in the city).

 

  • Turkey announced it has killed at least 260 Kurdish fighters in Syria, with ’the operation going forward as planned’. To say that the developments frustrate the US, Russia and the EU would be an understatement (the peace process started in Sochi is collapsing, and Turkish forces are now advancing not just towards Afrin, but toward Manjib, as well, which is another key town in the region, with US forces inside). German lawmakers threatened to stop weapon deliveries to Turkey (in the ground fighting, German-produced Leopard tanks play a dominant role), and as a sign of the new normal in Europe, Kurds and Turks had a mass brawl (involving 180 people!) at the Hannover airport.

 

Have a nice day,

Mihály

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