Market update: The selling continues as investors freak out, ballistic missile attack on Ryadh

26 Mar

by Mihály Tatár

 

Good Morning!

 

  • The selling continued with full force on Friday (SPX -2.10%, Nasdaq -2.43%, DAX -1.77%, Nikkei -0.58%, Shanghai -1.64%, Facebook -3%, Apple -2.3%, Google -2.80%, Amazon -3.4%, Bank of America -4.5%, Citibank -3.3%, Tesla -2.5%), as nobody wanted to be the last person holding last years’ favorite  stocks. To put the moves into perspective, the SPX lost more than 6% in a single week and is now re-testing the February lows (this spot is about 10% lower than the record high achieved in January, after the one-way 274% rally since 2009.) In the morning, futures stabilized somewhat on the talk that the US and China are in intensive negotations on trade (not surprisingly, the US wants more market access in China, including financial companies, car selling and – a key issue as discussed here earlier – semiconductors), with the Chinese side suddenly listening after Trump’s brutal tariff package last week. Even amid the sell-off, oil prices had no problem inching higher on the ’Bomber-Bolton’ theme (WTI 66.50, Brent 71 USD), totally decoupling from other commodities where traders were turning negative on global and Chinese growth   (Copper -6%, Iron Ore -10% in 10 days). Currencies in general remained quiet (EURUSD 1.2370, EURHUF 312.80, EURPLN 4.2260), but nobody counts on a quiet 2018 anymore and the 3M Libor is now above 2.29%, the highest since 2008.

 

  • Causing panic and visibly shocking inhabitants, the Saudi air force had to intercept a ballistic missile attack on Ryadh. (The missile, naturally, came from Yemen and targeted the international airport. It’s not hard to predict the pressure will be enormous on the Saudi leadership to retaliate.) In the meantime, Turkish President Erdogan announced that the military operation will now focus on Sinjar, in Iraq, with Kurdish fighters hastily retreating in that direction. (Interestingly, Baghdad barely reacted this time – this operation must had prior approval from Iraq and Iran). It’s also worth noting that while it is barely reported in detail in the European media, the US – China arms race heated up brutally in 2018: The Pentagon has just received its largest ever (!) military budget (1.3 trillion USD in total), with the military boosting its assets almost every category (+85 Abraham tanks, +14 warships including two aircraft carriers, +90 F-35 stealth figher jets +86 combat helicopters, +15 tanker aircrafts and more funding for lasers and anti-missile technology). This is in quite a contrast with the EU, as France and Britain struggle even to hold large-scale naval drills after decades of underspending on defence.

 

Dear Readers, as I am leaving for Eastern holidays, the next article will posted on the 3rd of April.

Enjoy your week,

Mihály

 

 

 

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