Market update: Talks spread of a new emerging market crisis, Trump approval not following the rules

8 May

by Mihály Tatár


Good Morning!


  • With somewhat less enthusiasm, but the positive mood persisted on Monday, also helped by Warren Buffet talking up Apple and investors being relieved by yields not doing much lately (SPX +0.35%, DAX +1%, Nikkei +0.16%, Shanghai +1.37%, US 10Y yield 2.95%, Apple +15% in May). That said, the Dollar buying and Emerging currency-selling continued non-stop (EURUSD 1.19, USDCHF above 1.00, Thai Baht 31.95, the favorite targets yesterday being the Chilean and the Mexican Peso together with the Indian Rupee, regional currencies still less in focus, PLN 3.578, HUF 264.20), prompting analysts to discuss a potential new emerging markets crisis. (Indeed, the latest developments don’t look pretty: A lot of money left emerging portfolios in the last few weeks, and Dollar-based emerging debt return is negative for the first time since 2004. In my personal view, however, yield and rate normalization in a time of strong global growth is a natural development – unless, of course, you are one of those countries or companies who are even more over-indebted in a foreign currency than at the start of the financial crisis and cheap central bank liquidity.)


  • Trump suddenly tweeted that he will announce his decision on the Iran nuclear agreement today, ahead of the 12/May deadline, resulting in a fresh round of profit-taking (WTI 70, Brent 75.50 USD, another ’mysterious reaction’ for Bloomberg,  I guess they weren’t long since October when the analyst view was a boring oil market with Brent at 55 USD.) According to unconfirmed reports, large Western military movements are underway in the Middle East right now – US, French and British warplanes have been arriving steadily at military bases using Israeli airspace. (Of course, the reason of this is hard to interpret from the outside – could be simply a signal for Teheran to behave – Hezbollah just scored a brutal election win in Lebanon, placing the country firmly in the Iran camp -, or preparations for a larger Pompeo-style campaign together with Israel.)


  • In a funny development even for today’s level of media ethics, Reuters distanced itself from its own poll result, which showed the US President’s approval spiking (80% of GOP supporters and 50% of swing-voting independents now being positive), going against the polite opinion that Trump is heading towards a decisive mid-term election defeat in November. (This shouldn’t really be a surprise: As discussed at the time, tax cuts are – breaking news only for left-leaning journalists – good for popularity. While the Mueller investigation hasn’t found a simple interesting fact about the ’Russian collusion’ in a year, New York’s General Attorney – a fierce critic of Trump’s treatment of women – just resigned for – what else- beating women, Trump’s travel ban is poised for victory at the US Supreme Court, and I didn’t even mention yet the South Korean President recommending a Nobel Peace Prize for him if talks with Kim are successful.


Have a nice week,


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