Market update: Stocks fall and the Dollar rises on Powell, May rejects the EU, a Polish oil giant is in the making

1 Mar

by Mihály Tatár

 

Good Morning!

 

  • The Powell-surprise kept lingering in traders’ head (SPX -1.11%, Nasdaq -0.78%, DAX -0.44%, Nikkei -1.76%, Hang Seng -0.46%, EURUSD 1.2180), with the sentiment not helped by several softer economic number (US Chicago PMI, durable goods orders, home sales all pointing towards some deceleration). Oil prices remained heavy, too (WTI 61.60, Brent 64.60 USD) with US gasoline and crude oil inventories surprising massively to the topside, just as the data came out that US oil production jumped to a fresh record high in November, bypassing that of Saudi Arabia (upps.) The 3M Libor finally jumped over 2% (good luck Dollar-over-indebted economies and companies), and traders spent Wednesday selling the Pound and British assets (GBPUSD 1.3750, FTSE -7.2% since late January) after Theresa May rejected the EU’s draft Brexit plan as totally unacceptable. (It is quite evident that the draft was meant to be unacceptable – and chief EU negotiator Michel Barnier seems to be pushing the UK towards the customs union solution, making pro-Brexit lawmakers moving against May. Also, with this draft, the EU is ignoring British demands for a longer Brexit transition period, increasing the pressure on London – but  personally I suspect that the transition period will have to be extended at some point either to save May or the orderly process of Brexit itself.)

 

  • After years of ongoing rumours, the Polish government’s plan to create a national oil giant became official: PKN Orlen, the country’s largest company by sales, signed a letter of intent to buy the government’s majority stake in Grupa Lotos, potentially creating an entity with 35 billion USD of annual revenue. (While analysts seem to be lost at the technical details and at listing all the problems this merger would create, the bottom line is that the Poles are deadly serious this time: PM Morawiecki talks about his plans to reshape the Polish economy ’on the model of South Korea and Japan’, meaning having national champions.) PKN Orlen rallied 2.5%, Lotos 5% on the news.

 

  • It’s worth mentioning, as it is somehow underreported by the mainstream media, that Donald Trump’s popularity is still on a steady rise: According to the latest Rasmussen poll, his approval rating is now 50% (this is quite good for any president, Obama had it at 43% in his second year of presidency). This should be, of course, no surprise – tax cuts and bipartisan proposals are always popular, whatever the media efforts are to discredit them. Democrats and Democrat-leaning journalists seem to be quietly panicking by now – instead of the possible impeachment in 2017 and the ’sure’ mid-term victory they now face a stronger-than-ever opponent. (Trump destroyed them even when polling much lower. It’s no wonder that he announced he will run for re-election in 2020 this week).

 

Have a nice day,

Mihály

 

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