Market update: Bond market pressure makes traders thinking, China to become the Detroit of electric car batteries

1 Feb

by Mihály Tatár


Good Morning!


  • Yellen achieved the nearly impossible and said nothing of interest at her last FOMC meeting (’gains in employment, household spending, business investments solid’, leaving the market pricing a March rate hike with 90% probability and expecting two more this year). The attention turned back towards the under-pressure bond markets (US 5Y 2.55%, 10Y 2.75%, even the Hungarian 10Y yield retraced from the surreal low of 1.90% to 2.30%), with stock and currency traders clearly at odds of what to do next (EURUSD 1.2410, SPX +0.05%, DAX -0.06%, Shanghai -1%). Regional currencies remained competely out of the focus (EURHUF 310, EURRON 4.65, EURPLN 4.152 – this may change in the coming months, for example,the Hungarian National Bank is the only central bank in Europe that keeps easing monetary conditions), and in the meantime, the German unemployment dropped to a another record low (5.4% – Italy’s is over 11%, a divergence that won’t be lost during the upcoming elections). Speaking of the EU -as forecasted here after the German elections – angering French President Macron, Berlin’s appetite seems to be very limited in starting far-reaching EU reforms: Judging from the leaked coalition talks with SPD, the long-planned expansion of the European Stability Fund into a European Monetary Fund, a European framework of minimum wages and a somewhat bigger EU budget are all that are in the pipeline. (What about the long speeches and endless summits about a common finance ministry, the banking union and the badly needed EU army?).


  • Bloomberg notes that China is deadly serious in becoming the world’s dominating electric-vehicle battery producer: Contemporary Amperex Technology (CATL), for example, is just planning to build a 3 billion USD factory, making it second in size only to Tesla’s Gigafactory and dwarfing the suppliers of GM, Nissan and Audi, from 2020.  (To give a feel of the Chinese amibitions: The current battery plant capacitiy of the whole world –ex China – is 42.4 GWh, while the currently planned Chinese capacity is 130.4 GWh.  The West is in danger of becoming the Nokia versus Huawei in the electric battery industry.)


  • While the media’s delusional reporting of the North Korea – South Korea ’warming up’ continues, geopolitical strategists were alarmed by the news that Washington’s ambassador-designate to Seoul, Victor Cha has been suddenly dropped. (He is well known to be strongly against a military strike against North Korea.) As discussed here earlier, while it went out of scope in the news, the military preparations continue unabated (stealth bombers keep arriving at Guam, Japanese cities hold missile attack drills and plan to install land-based Aegis anti-missile batteries, Britain quietly investigates how to rapidly evacuate 10,000 Brits from South Korea in case of war.)


Have a nice day,



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