Market update: All eyes on earnings and the Trump-Putin meeting, the US joins the Asian arms race

16 Jul

by Mihály Tatár

 

Good Morning!

 

  • The rally gradually fizzled out on Friday (SPX +0.11% – we are now 2% away from the historical record high, Nasdaq +0.03%, DAX +0.38%, Shanghai -0.45% –  new loans creation in China dropped to the lowest level since 1996, with analysts trying to explain it away with last years’ monetary tightening), as the market is waiting for the earnings season report avalanche and the Trump-Putin summit in Helsinki. Currency and commodity traders slowed down to a more summerish speed as well, with the Dollar pulling back somewhat and emerging currencies strengthening further (EURUSD 1.1680,  EURHUF 322.80, EURPLN 4.31, Brazil Real and Turkish Lira +1%, even the Pound appreciated somewhat – GBPUSD 1.3250 – after Trump called the no US-UK trade deal post-Brexit line ’fake news’), but oil prices remained under pressure (WTI 70.60, Brent 74.80 USD) on the talk that Washington is considering to sell 30 million barrels from its oil reserves to cool down prices before the mid-term elections in November (no shock for regular readers). The only victim of the day was the Russian Rubel (-1%), after the US indicted 12 Russian intelligence officers (somewhat funnily, for hacking into the servers of the Democratic Party and leaking that the internal   election was rigged for Hillary Clinton against Bernie Sanders just before the presidential elections), making mainstream journalists hoping that the Helsinki summit will end in failure. (Personally I doubt this will be the case – a dialogue and practical dealmaking is in  both parties’ interest with the situation in Syria spiralling towards an Israeli – Iranian war – just when Russia agreed to investing USD 50 billion in Iran’s energy sector – and as Iraq and the Ukraine look just as the mess they were before the US-Russian ’Cold War Light’. It’s worth noting that Putin’s poll numbers are going down rapidly at home, with the population not being grateful for Moscow’s fiscal tightening – including the brutal pension ’reform’ and even large military projects, like the Su-57 being cancelled. Easing of the anti-Russian sanctions is probably a bigger priority for Putin now than back in 2015.)

 

  • While the EU’s always relevant President, Donald Tusk, called on Trump to ’reform the world order rather than bring it down’, informing him that ’there is still time to prevent conflicts and chaos’ – and while angry German politicians tried to stop even the minimal defense boost Merkel promised to the US, as polls show the majority of Germans do not want US troops stationed in Germany (?!) – in the US, the focus is already on the arms race in the space: The director of NASA called for a permanent presence on the Moon and more investment in space-to-space weapon technology (’even every banking transaction requires a GPS signal for timing. If you lose the satellite signal, you lose banking.’). (As a sidenote the US is already testing flying ’drone swarms’ and ocean-warfare ’flying destroyer’ drones to counter the Chinese navy build-up – but hey, its never too late the set up the first battalion of EU soldiers, maybe by 2025.)

 

Have a nice week,

Mihály

 

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