Market update: Stocks bounce on Xi’s speech on global trade, all eyes on Trump’s response, Russian assets drop

10 Apr

by Mihály Tatár

 

Good Morning!

 

  • Chinese President Xi gave a ’let’s love each other’ style free-trader speech that even the IMF would be proud of, and promised more market access for foreigners and increased imports – it seems he is the good cop on the Chinese side – resulting in another bounce in most markets (SPX +0.33%, Nasdaq +0.51%, still testing the key levels, DAX +0.17%, Nikkei +0.59%, Shanghai +0.69%, WTI 63.90, Brent 69 USD also on the Middle East  tensions, Aluminium +6%, Copper +2%, Iron Ore +3% as metals were the most oversold). Traders were scratching their heads on what this development really meant (hint: not much, at this phase), and the market is also full of speculation on how the Chinese would now strike back (weakening the Yuan or stopping buying US Treasury bonds, given that funnily enough, they don’t import enough to copy the US move. Both would do little harm to the US in the long term, but would infuriate Washington further, however). Not every market had a pleasant day to say at least: The Tukrish Lira dropped to another record low (4.079 against the Dollar) and Turkish stocks dropped 2% after President Erdogan called for lower interest rates despite the runaway inflation and financial stress. The Iranian Rial crashed 20% (!, this is the second collapse within a year) as black-market currency traders speculate that Trump will scrap the nuclear deal on 12th of May, and Russian assets – the long-time favorites up until now – dropped like a stone with the latest round of US sanctions and the real threat of military clashes on Syria (Moscow stock exchange at one point -5%, the Rubel weakened 6% (!) to 60.41 per Dollar, and according to the calculations of Bloomberg, Russian billionaires lost 16 billion USD on Monday, from nickel miner Vladimir Potanin, through Aluminium king Oleg Deripaska to Lukoil CEO Vagit Alekperov).

 

  • Geopolitical tensions jumped to a new level yesterday, with everyone waiting for Trump’s response to the Syrian chemical attack. It’s worth mentioning that both parties in Washington are unified in calling for a military response, and after the latest Trump remarks, the US is in no position to retreat, even tough clearly Russia is very serious in threatening with ’grave consequences’. (The latter could be seen yesterday in Moscow’s unprecedented rage against Israel, which it accused of conducting the air strikes on a Syrian airbase. Many consider the Israeli action as a ’feeler’ before the US operations, as it could not have happened without the US’s approval.) One has to worry that if the US does anything more than the ’one-day cruise missile shower’ as in 2017, it will be extremely hard to avoid shoot-outs between Russian and US military assets over Syria, escalating the conflict to a new level. (Just imagine a US bombing raid being ’too successful’ and killing several dozen Russian air service members – the retaliation is assured and might come in the Ukraine, for example.)

 

Have a nice day,

Mihály

 

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