Market update: Traders await the US debt auctions, Daimler falls on the latest emission scandal, Turkey threatens Syria

20 Feb

by Mihály Tatár

 

Good Morning!

 

  • Movements were slow but wary with US markets closed down on Monday (DAX -0.53%, of course not helped by the report that Mercedes cars had softwares designed solely to pass regulatory emission tests – Daimler -2%, MIB -1%, Nikkei -1.20%), and traders are now focusing on the massive US debt issuance this week, in the tune of 260 billion USD. (The US 5Y yield stands at 2.66%, the 10Y yield at 2.91% – it will be interesting to see if the higher levels attract yield-hungry pension funds around the globe – even Italy pays a mere 2% for 10Y these days and demographic pressure is brutal from Tokyo to Berlin – or the investor strike is on and the expected yields jump further, with the 3M Libor already over 1.88% and Europe experiencing a record weekly outflow from high yields funds last week, almost 3% of assets under management.) Currencies remained on a slow burner (EURUSD 1.2380, EURHUF 311, EURHRK 7.438), with the Zloty in the spotlights (EURPLN 4.134, rallying  8% in one year and 5% since September with traders sensing the EU giving up on punishing Poland  and ignoring the Holocaust scandal.) Oil prices moved roughly sideways with the stronger Dollar (WTI 62.30, Brent 65.50 USD), with metals dropping on the US tariff fears (Copper -1.7%, Aluminum -0.5% with Chinese Aluminum stocks falling 4% as US accounts for not less than 16% of all Chinese Aluminum exports). Speaking of the tariffs, the EU leaked out that it can react to the US tariffs by counter- tariffs on orange juice, tomatoes, motorbikes and whiskey – Brussels must feel powerful now – with the timing and the scale not the best as Japan announced it will buy 40  F-35 stealth bombers from Washington and the Quad (US, India, Japan, Australia) proposing an alternative infrastracture project to rival the Chinese Belt and Road Initiative.

 

  • Syria confirmed that it is sending forces to the Afrin region, to help Kurds combat the Turkish incursion (the US must be happy – but this is entirely their making), and the Turkish answer arrived immediately, with Ankara raging that it is ready ’to battle Assad’, and that it is moving into Kurdish enclaves ’within hours’. (Turkey battling Syria and Iranian militias would change the war completely, and make the current, ’ethnic federal states’ -based peace plans dead in the water. Also, this is very bad news for Putin, who announced that ’the war is over’ last year to ensure calm elections, only to find the Russian media now discussing the fallen Russian fighters from the US strike 24/7.)

 

  • As forecasted here in 2015 after Merkel’s immigration decision, the sinking feeling around German politics continues non-stop, and by now this is even acknowledged by major newspapers such as the widely read, left-leaning Spiegel. (They even talk about ’Western Democracies in crisis’. Hey, where is the happyness about the SPD leading the nation in the coalition for another four years?!) Altough journalist seem to have a hard time to connect the dots between the 2015 events (forcing a population replacement over a country without any voter approval and calling it a temporary humanitarian action) and the 2017 elections, the fact is that the latest polls show that if elections were held today, it is not even sure that the CDU and the SPD together had a majority (!). This is a very serious development, and Merkel’s political capital collapsed as a result just as the key EU reforms could have been tackled with France led by Macron. (Currently, Merkel’s political future hinges on the internal SPD mail vote on the coalition – this process is so slow that results will be known on the 4th of March only – quite humiliating in my personal opinion.)

 

 

Have a nice day,

Mihály

 

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