Market update: Stocks and the Dollar advance on a relaxed Draghi, Trump to meet Kim, China in the crosshairs

9 Mar

by Mihály Tatár

 

Good Morning!

 

  • Draghi, this time, managed to avoid saying anything unsettling (the ECB will wait patiently until inflation heats before tightening and raising rates, he is very optimistic on European growth), and the news that Trump and North Korea’s Kim may meet directly on denuclearization also helped the risk sentiment (SPX +0.45%, DAX +0.90%, Nikkei +0.45%, Shanghai +0.58%, US 10Y yield 2.87%, EURUSD 1.23, EURHUF 311.80, EURPLN 4.20). (As a sidenote, if Trump pulls of this North Korea deal, the entire Western foreign policy establishment of the last 40 years will be utterly humiliated, not to mention the Nobel Peace Prize comittee who idolized Obama or Arafat for nothing. It’s no wonder everyone is trashing the prospects of this development.)  The steel and aluminimum tariffs were officially launched – sparing Mexico and Canada for now, starting a relief rally in both currencies – and the market is waiting for the next punishment, altough Trump gave it a friendly face and ’asked’ China to cut the annual China trade deficit by 100 billion USD. (Ups, that’s 25% !).  This, of course, resulted in some angry comments from Beijing (without of course, any specifics – then Trump would talk about 50%).  That said, in reality it will be a tough process for the US to work down this trade deficit, and it’s worth mentioning that Hauwei just topped the patent filings in Europe in 2017 (yes, surpassing even Samsung, Intel, and Ericsson) meaning it may not even be enough to reverse fortunes. With the stronger Dollar and the trade war theme, commodities remained under pressure (WTI 60.30, Brent 63.80 USD, Copper -2.5%, Iron Ore -6%, Gold 1318 USD), and Bitcoin tumbled to 8400 USD (another -13%), not helped by PayPal CEO Dan Schulman calling crypto currencies ’just an experiment’.

 

  • The new German finance minister – one of the most powerful jobs in Europe – is expected to be old-time SPD politician Olaf Scholz (currently the mayor of Hamburg). His views are known to be almost closer to the conserative CDU than to the Left – he was a tough supporter of the 2004 German labor-market reforms and an enemy of Martin Schulz -, and will be on the same page as Merkel in most topics. (Many are wondering what he will do with Commerzbank – he had a hand in the forced sale of HSH Nordbank in Hamburg.)

 

  • The Wall Street Journal notes that two years after the Iran nuclear deal, the country’s oil boom just hasn’t showed up: Most international companies are staying on the sidelines with Trump’s threats to reimpose tariffs and seeing the majority of banks keeping distance. (Instead of the 10 billion USD of foreign spending promised by Iranian officials to their population, only about 1.3 billion has been injected, mostly from China). After an initial uptick, oil-production has plateaued at 3.85 million barrels per day, and Trump’s May 12 deadline for amending the deal approaches quickly. (It’s not just the US who is bad for business: Last month Iran canceled a liquefied gas project with a Norwegian company after criticism from local hard-liners, who warned against ’letting in foreigners’.)

 

Have a nice day,

Mihály

 

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