Market update: Trump promises 1.5 trillion for infrastructure, Bitcoin drops, Poland is flying

31 Jan

by Mihály Tatár

 

Good Morning!

 

  • Markets waited for Trump’s first State of the Union speech in a tense mood (SPX -1.09%, Nasdaq -0.86%, DAX -0.95%, Nikkei -0.38%, EURUSD 1.2430, bouncing from the key levels mentioned early January WTI 63.90, Brent 68.40 USD) on Tuesday, with traders entertaining themselves by crushing crypto currencies (Bitcoin -13% to 9600 USD, no comment.) The late-night speech turned out to be quite impressive – you know it was good when all the mainstream media could complain about was it being ’divisive’ and ’unsubstantial’. Trump gave an upbeat summary of the situation (2.4 mio jobs created in one year, unemployment is at a 45-year low with Black and Hispanic unemployment at record low as well, tax reforms done, ISIS almost eradicated, defense spending boosted to a brutal 660 billion USD), and promised to focus on immigration reform and infrastructure spending in 2018. On the latter, he proposed a 1.5 trillion USD spending bill, partly from private financing – this of course started an avalanche of media lamentation that it ’could not be done’, or ’would take 10 years to complete’. The new amount will probably put further pressure on yields and eventually construction-related commodities. On immigration, the proposal remains to allow Democrats to legalize DACA immigrants in return of a 25 billion USD budget for building the Trump Wall – this remains a crucial political topic before the 2018 mid-term elections and as said before, the loyalty of the Trump base depends entirely on this project. The immediate market reaction has been muted – today we have the Fed rate setting meeting with Yellen’s final speech – and the market completely ignored the macroeconomic news, as well: The US consumer confidence surprised to the upside again, showing the most confidently spending Americans since the 1990s, France printed the highest growth in six years (1.9% Y/Y), not even Spain slowed down on Catalonia (3.1% Y/Y), and Poland, well, seemed to be even helped by the EU criticism (4.6% Y/Y) (!).

 

  • The Russian reaction to Washington’s ’Russian oligarch list’ – naming 96 private individuals and 104 top government figures  -, was that of both frustration and laughter (Putin called it ’unfriendly act’, several ministers ’hilarious’). The new list doesn’t mean new sanctions for now – Trump clearly wanted to satisfy anti-Russian Republicans without actually calling for Russian retaliation – but privately, many in Russia and Europe are worried that the even the existence of the list will hurt business, investments and bank relationships further. (On the other hand, some analysts now forecast Putin winning by an even larger margin in March.) In the meantime, in another huge setback for the Saudi-led alliance, Yemeni separatists have taken full control of the key port city of Aden, which means that the pro-Saudi government has basically collapsed. (Oil prices better stay high if Riyadh wants to avoid a total defeat in this war.)

 

Have a nice day,

Mihály

 

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