Market update: US inflation refuses to be dynamic, Merkel talks tough

11 May

by Mihály Tatár


Good Morning!


  • The US inflation numbers refused to be dynamic and suggested lazily spending consumers (M/M 0.1%, Y/Y 2.5%, earnings 0.2%), resulting in a corrective bounce in the Dollar (EURUSD 1.1915) and happy stock traders – the Fed is less likely to be aggressive – (SPX +0.94%, DAX +0.62%, Nikkei +0.90%, Hang Seng +1.36%). (In my personal opinion, the simplistic expectation that higher growth automatically leads to higher inflation, working like gravitation in physics, was always naive – an economy is not like a two-dimensional two-variable chart. Wait until Trump introduces 20%-30%  tariffs, or infrastructure spending jumps from Washington to Rome, now that will start prices movin’.)   Oil prices were not sure how to continue at the new highs   (WTI 71.30, Brent 77.35 USD), instead, the Rubel strengthened massively  (RUB 61.67 or +4% ), widely attributed to the high oil prices, but a more decisive factor is that traders think that the worst in the US-Russia relationships, and sactions, is over. (Many also noted the screaming silence from Moscow after the largest-ever Israeli air strikes on Syria this week and now the massive military deployments, including tank columns, on the Syrian border – clearly the US-Israeli actions were pre-coordinated with Putin.)  In a sudden turn of events, the Five Star Movement and the Leage are on the verge of an agreement to form a government in Italy – realizing the worst case scenario from Brussels’ perspective – and traders continued to sell Italian assets (MIB -2.30% in three days, as investors are having a hard time to decide how bad this news is – both parties want structural reforms and large government spending to begin with.)


  • Shaking up Europe’s media and telecom industry and exciting the market, Vodafone announced to buy almost a third of Liberty Global for USD 22 billion, becoming a cable – phone – internet package giant on the European market. (In case the EU  – which one day is pushing for stronger cross-border competition, only to fight large mergers on the other – allows it.) Showing the significance of the deal, a visibly nervous Deutsche Telekom CEO called the purchase ’totally unacceptable’.


  • Well this didn’t take long: As predicted here, the US did not stop at re-installing the Iran sanctions and already increased the pressure on Iran: The Treasury Department – together with the United Arab Emirates – accused the Iranian central bank of illegally funelling Dollars to the elite Quds force  and imposed new sanctions on several Iranian companies and officials. In the meantime, the offended EU kept talking tough – Merkel went so far to say that ’Europe can no longer count on the US protecting it, and must take its destinity to its own hands’. (No problem Angela. You ready to pour that 1,000 billion euros into defense, which Germany redirected towards other goals in the past decades? )


Have a nice day,



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