Market update: Oil prices blast through resistance, Dollar stronger after job report

7 May

by Mihály Tatár

 

Good Morning!

 

  • The market was content that the US employment data was good but not too good (from a Fed perspective), and that the first round of the US-China negotations went nowhere (’the sides agreed to keep talking’, or as Trump put it, ’it is hard for China in that they had become very spoiled’). Equities rallied (SPX +1.28% – technically speaking, we are moving sideways at the February lows, Nasdaq +1.71%, DAX +1.02%, Shanghai +1-29%), the Dollar slowly strengthened further (EURUSD 1.1950), but the main preoccupation of traders remained to buy oil (WTI 70.40, so through the 70 level, Brent 75.70 USD, so through the 75 zone) and to sell South America (USDMXN 19.28, Argentinian Peso 21.86 with the central bank forced to raise interest rates to a whopping 40%). It’s worth mentioning that professional opinion on what will happen after Trump’s 12/May decision on the nuclear deal has never been so divided: Geopolitical analyst firms seem to believe that Trump will scrap the accord but do little else (’nothin’ will happ’n) to force a slow re-negotation (in that case, the oil rally is overdone, even with global growth doing this  good), while hedge funds seem to be on the opinion that Trump’s new team (Mike Pompeo, ’Bomber’ Bolton) will be given a green light to ’cut back Iran to size’, meaning everything from new creative sanctions to air strikes in Syria or destabilizing the government. (There are already some protests in the country now, with the price of daily essentials like meat and bread having jumped 10%). The Turkish Lira weakened to another record low (USDTRY 4.288, 10Y yield 13.76%), and it seems officials started to get worried as Turkish residents were suddenly restricted in borrowing in a foreign currency. (In the meantime, Turkish President Erdogan promised more cross-border military campaigns should he win the snap elections – as traders jokingly put it, he gave up on the Kurdish vote – , and the Greece-Turkey tensions turned into daily ship incidents and mutual cyberattacks). Regional currencies remained out of focus but appreciated the better sentiment (EURHUF 313.60, EURPLN 4.244), with traders watching the Romanian Central Bank today, which is expected to raise again to 2.50%, as inflation is set to rise over 5% (!).

 

  • Agriculture analysts warn that cutting-edge agricultural science is moving rapidly to the East, after decades of hysterical anti-gene-editing media campaigns in the US and Europe. The latest news is that seed and chemical giant Sygenta – now owned by state-owned China National Corp – is building up a research hub in Beijing focusing on DNA altering technologies, banking, of course, on unlimited government financial support.

 

 

Have a nice week,

Mihály

 

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