Market update: Risk taking bounces except for Italy, Amazon takes on credit cards

6 Mar

by Mihály Tatár


Good Morning!


  • It seems somebody forgot to tell markets that tariffs are the end of the world, and risk taking bounced (SPX +1.10%, DAX +1.49%, Nikkei +1.91%, Shanghai +0.79%, US 10Y yield 2.89%), prompting traders to crack jokes about ’needing more tariffs’. To be fair, the sudden optimism was also helped by hedge fund billionare Ray Dalio calling the policies a mere ’political show’ and the globalist Republicans (speaker Paul Ryan and chief economic advisor Gary Cohn) lobbying hard at Trump to backtrack.  (In my opinion, it is true that in Trump’s world, everything is up for a deal – for example, he offered Mexico and Canada exemptions on the tariffs if they bend at the NAFTA talks – but the tariff policy  is far from being only a political show. Trump’s trade heads, Ross and Navarro, are deadly serious about repositioning the US in world trade, and looking at the US foreign trade data, it is easy to understand why.) Italian assets suffered somewhat (MIB -0.42%, Unicredit -3.4%, and Italian bond yields jumped 10-15 basis points) with the uncertainty of who can make a government now, and oil prices rallied (WTI 62.70, Brent 65.60 USD, attributed to the offline Libyan production but I suspect traders are simply preparing another try at the key top levels.)


  • In a further sign that the traditional borders between banking and online businesses are quietly disappearing,  E-commerce giant Amazon is in talks with US banks to create new online accounts on the model of PayPal, moving away customers from credit cards. While at this stage the project looks like a cooperation with traditional banks, we know where this process is headed because in China it already led to smaller banks becoming irrelevant and online retailers morphing into quasi-banks.


  • Turkey stepped up its offensive in Northern Syria, launching deadly airstrikes against Kurdish and pro-Assad forces (killing 82 fighters in 24 hours), and Turkish troops captured a strategic village, surrounding the Afrin enclave. Nobody expects things to calm down, as Kurdish fighters are leaving the war against ISIS in the thousands and prepare counterattacks on the Turkish army. In the meantime, the world-wide arms race just got hotter: China announced a drastic, 8% (!) incease in its official defense budget, pushing it to USD 175 billion, to create a ’state of the art’ military. (It was already the second biggest spender after the US. Somebody should notify the EU, that the rest of the world is not competing in taking in refugees.) The fear from Chinese expansion became so wide-felt in Asia now that the USS Carl Vinson strike group was just invited to make  a ’good-will visit’ to former enemy Vietnam.


Have a nice day,


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