Market update: Investors cheer the Chinese gestures, Zuckerberg testifies, oil prices jump

11 Apr

by Mihály Tatár

 

Good Morning!

 

  • With People’s Bank of China governor Yi Gang announcing the extension of the Shanghai – Hong Kong stock corridor (meaning foreigners get more access to the Chinese markets) and Trump praising President Xi, traders remained optimistic that the trade war can be avoided (SPX +1.67%, DAX +1.11%, Shanghai +0.73%). Mark Zuckerberg arrived at his Congress hearing in suits (where is the emblematic gray T-shirt now?) and continued the ’apology tour’ so vehemently that Facebook jumped 5% (Nasdaq +2%, as lawmakers seemed to be still running behind the news on the gross abuse of personal data at big tech). As predicted three weeks ago, after taking profits, oil traders were only waiting for the right opportunity to buy again, and this arrived when Saudi Arabia signalled its preference for prices at 80 USD (WTI 65.30, Brent 70.70 USD, MSCI Energy +3%, Exxon +3%, Shell +2.5%, BP +2.3%). Of course it helped that air traffic agency Eurocontrol issued a warning toward all airlines of possible missile strikes over Syria, US, French and UK warships and jets were seen rushed towards the region including the Henry Truman aircraft carrier strike group – this doesn’t look like a ’one day cruise missile shower’ anymore – , and Russia vetoed the UN probe into the chemical attack. The anxious selling – or rather, profit taking – in Russian assets continued (the Rubel weakened to 64 USD per Dollar, that is a 10% depreciation in 2 days, the 10Y bond yield spiked from 4.40% to over 5%), and Aluminium extended its rally to 11% since Friday as top exchanges, fearing the US sanctions against Russia, stopped accepting metal from United Rusal. The EURUSD jumped to almost 1.24 on ECB council member Nowotny’s comments that it is time to start tightening monetary policy and that he would start by raising interest rates from -0.40% to -0.20%, (the ECB immediately dismissed the line as a personal view, but traders knew which way the wind is blowing), while regional currencies strengthened somewhat in the general positive mood (EURHUF 311.40, EURPLN 4.187, EURRON 4.657).

 

  • In an unlikely coincidence, Saudi Arabia just raised a monster 11 billion USD by issuing 7, 12 and 31 years bonds, without even a roadshow, just when boycotted Qatar is organizing its own this week. While the challenges ahead of Saudi Arabia are enormous (financing two wars at once, and the industrial mega investments, to begin with), investors clearly appreciated the Crown Prince’s iron hand policies (plus the rising oil prices), and the price was quite fair (140, 175 and 210 points, respectively, over the similar-maturity US Treasuries).

 

 

Have a nice day,

Mihály

 

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