Market update: Investors relieved by the ‘trade war truce’, Facebook plunges

26 Jul

by Mihály Tatár

 

Good Morning!

 

  • After investors were waiting stressfully in the European session for news from Washington and in the meantime coming to terms with not-so-rosy quarterly reports and warnigns   (DAX -0.87%, MIB -1.43%, Fiat -16%, Daimler -2%, Ferrari -2.3%, Vodafone -1.3%, Airbus -1%), the news of the ’US-EU trade cease fire’ naturally resulted in a massive rally in the US session (SPX +0.91%, now less than 1% away from the historical record high, Dow +0.68%, Nasdaq +1.17%, US 10Y yield 2.97%). This ’trade cease fire’ expression is actually typical and wrong, in my view:  The EU agreed to build several liquefied gas terminals, to boost its imports from the US, and purchase lots of soybeans  – the latter is a jab at China, which tries to pressure Trump by killing US soybean exporters -, and ’work towards zero tariffs’, in return of avoiding the feared US car tariffs. We will have to see what really comes out of this deal –  the EU’s strong point, as we know, is not implementation, and Trump may get impatient quickly – but this is actually a major concession from the EU. (And this fact did not avoid Asian traders, Nikkei -0.17%, Shanghai -1.16%, Hang Seng -0.83%). In the meantime, ’the data scandal has absolutely no consequences’ Facebook dropped a whopping 24% – destroying 150 billion USD in wealth – , after its CFO admitted that growth has been decelerating and even negative in some cases. Currency movements were more muted with today’s ECB meeting approaching (EURUSD 1.1730, GBPUSD 1.32, EURHUF 325.30, EURPLN 3.66, USDCAD 1.3040 – with the Canadian dollar rallying on the optimism that Nafta re-negotations will also pick up speed), and oil prices kept edging higher attributed to two Saudi vessels being attacled by Yemeni militia forces and Iran threatening with blocking the Strait of Hormuz again (WTI 69.30 USD, Brent 72.30 USD). (As a sidenote, Iran’s central banker was just fired, clearly thrown under the bus and used as a scapegoat for the country’s slow-motion monetary collapse.) In Pakistan, investors staged a relief rally (Karachi stocks +3.4%) that not a hung parliament will be the result of the elections, with former cricket star – and army-compatible – Imran Khan getting close to win an outright majority. (As discussed here before, not a single commentator forgets to mention that ’this clears the path for the negotiations with the IMF’, taking a bailout as easy and for granted, which is never a good sign.)

 

 

Have a nice day,

Mihály

 

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