Market update: Corporate news dominate trading, Texas becomes an oil superpower

19 Jul

by Mihály Tatár

 

Good Morning!

 

  • Investors focused on company earnings and news on Wednesday (Google got fined by 5 billion euros in the EU for Android practices – to put this in perspective, this is Netherland’s entire yearly contribution to the EU budget, but Google generated this amount of money every 16 days in 2017; Morgan Stanley, SAP and Ericsson jumped after positive surprises; the market was pleased to see Amazon’s Prime Day showing record sales; aluminium giant Alcoa fell as it was forced to cut profit targets on the metal tariffs), with the sentiment staying generally positive (SPX +0.22%, DAX +0.82%, but Nikkei -0.03%, Shanghai -0.17%), after Trump’s economic adviser Larry Kudlow’s upbeat but tough assessment that all is going well, ’EU officials are working hard on a free-trade offer’, there is ’good progress on Mexico’, while in the case of China, ’President Xi is holding the game up’ and that the US will therefore follow through with its threats. Oil prices rebounded somewhat (WTI 68.80, Brent 72.80 USD – note that the front end slumped into contango for the first time since September), with the Dollar strengthening slowly further (EURUSD 1.16, GBPUSD 1.3016 with May’s popularity falling to 25%, EURHUF 324.20, EURPLN 4.312), with non-stop Pakistani Rupee weakening (now almost 130 per Dollar, from 105 a year ago), and the Chinese Yuan weakening reaching 8% since April.

 

  • Iran announced that it has built a factory that can produce rotors for up to 60 centrifuges a day, clearly as a part of a power play with the US (I suspect by now they have read the Art of the Deal). This, of course, doesn’t put its allies, the EU, Russia and China in a comfortable position and an answer from ’Bomber Bolton’ is to be expected. In the meantime, according to unconfirmed rumours, at the Helsinki meeting – you know, where, according to the mainstream media, only the press conference happened – Trump and Putin agreed that Russia takes all security responsibility for all Southern and South-Western Syria (!), with the approval of Israel. Which, of course, would beg the question, what will happen with Iranian troops currently there? It’s also noteworthy that while the media keeps focusing on what-he-said, what-he-did-not-say regarding Trump (who I suspect doesn’t remember at all by now), Fox News by now openly debates with Trump whether countries like Montenegro (a NATO partner) should be defended at all (!!). Such a scene would have been unimagineable even 3 yearso ago, and in my opinion, that’s the moment when European NATO members should take a deep breath and re-think their position and goals in the world – US voters did not miss the fact that the Soviet Union is not there anymore and the brutally expensive Middle Eastern adventures were totally futile. (And don’t forget that Texas just surpassed Iraq and Iran as the world’s No.3 oil  producer. A Gulf War probably would not even happen if Saddam’s Iraq had invaded Kuwait today.)

 

  • As if China had not enough problems at the moment, Beijing’s top advisory body warned that the population decline will soon lead to a ’national crisis’, with the labor supply dropping by 100 million every 15 years after 2020 (!). They also noted with alarm that even after the Party reformed the one-child policy, the total number of births in Shandong Province – the epicenter of the reforms – actually dropped. The advisers are hoping, however, that artifical intelligence and robot workers will mitigate the problem (haha, join the club of wishful thinkers).

 

Have a nice day,

Mihály

 

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