Market update: Investors scared as Trump fires Tillerson, Volkswagen ramps up on electric cars

14 Mar

by Mihály Tatár


Good Morning!


  • While the US inflation report turned out to be a non-event (2.2% Y/Y, showing a steadily, but very gradually rising CPI), markets became anxious after Trump fired Secretary of State Rex Tillerson and replaced him with CIA Director Mike Pompeo (SPX -0.64%, Nasdaq -1.02%, DAX -1.59%, Nikkei -0.81%, Hang Seng -1.35%, US 10Y yield back to 2.82%).  As discussed last year, Trump took over a very hostile Washington when assuming the presidency, and had to make several concession, which included filling key jobs with ’well respected’, meaning establishment-liked, ’you can’t do that’ types (Cohen, Tillerson, McMaster). These people were, however, not compatible with Trump’s goals and management style, and now with Trump being much stronger, they are being replaced one-by-one. (To give a feel, Tillerson, basically a charismatic oil industry diplomat, used to be a boy scout, while Pompeo was a tank commander.)   What markets did not like is that Trump is now surrounded by unlobbyable hawks from international trade to foreign policy – Pompeo is known to be very hawkish on Iran (a brutal pressure regarding the nuclear deal is the minimum now I expect, maybe coupled with sanctions, or if pressure is not working even air strikes and regime change) – and the potential new Treasury Secretary Larry Kudlow is a national industry fan as well, who won’t slow down Trump’s trade chiefs anymore.  (And by the way, the new CIA chief, Gina Haspel – the first female leader of the agency – is dubbed ’Ms.Master Torturer’ as she was overseeing post-Iraqi war interrogations.) I would also add that Turkey, which tested the US for years and always found somebody to appease it (lately Rex Tillerson), will now encounter decision-makers who are not so sure Turkey is worth keeping within NATO on the expense of throwing Kurds under the bus, and accept humiliations like in Afrin (which can turn into a bloodbath in any minute).  The Dollar somewhat weakened (EURUSD 1.24), partly on the ’trade war’ theme, and partly on ECB Governing Council member Philip Lane not minding his mouth and commenting that ’the current level is not a concern, it is the volatility’, and oil prices slipped on general risk aversion and position closing (WTI 60.70, Brent 64.60 USD – by the way, did I mention Pompeo is hawkish on Venezuela, too?).


  • Volkswagen announced it has secured 20 billion euros worth of battery supplies for its aggressive push into electric cars in the coming years, and that it will redesign 16 factories for producing electric vehicles from the three currently. (The target is to produce 3 million electric cars by 2025. It should come as no surprise that Chinese manufacturer CATL is the main battery provider, building plants in Europe.) I am sure the embattled Volkswagen leadership feels very proud now, but investors didn’t seem to be that excited about the historical change from diesel to electric, from a diesel-specialist company, and share prices dropped 2%. (They are down 18% from January and almost 40% since 2014).


Have a nice day,



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