Market update: Eurozone growth slows down, Trump boosts China tariffs, the US warns IMF and Pakistan

1 Aug

by Mihály Tatár


Good Morning!


  • After the two-day selling spree, stocks bounced on Tuesday (SPX +0.49%, Nasdaq +0.55%, DAX +0.06%, Nikkei +0.88%), with bargain hunters coming in and Apple posting solid results (jumping 4%). Traders however, look more at Facebook for the general direction (still in -20%), with the market talk that if it is unable to jump back up, the best days of the Internet/tech giants are over. (As discussed last year, user growth rates are gradually peaking at these companies, they are not monopolies anymore, some of them, especially Facebook, burned the popular goodwill towards them and acquired a lot of political enemies. And in the phone market, Huawei, by the way, just surpassed Apple as the second largest smartphone seller after Samsung.) Chinese stocks didn’t appreciate this good news (Shanghai -0.43%) after the late market development that the Trump Administration is considering to raise the tariff rate from the planned 10% to 25% on the 200 billion USD worth of Chinese imports, further pressuring Beijing (and this is not a small one). In the meantime, currencies moved little: EURUSD 1.1680  (Eurozone growth slowed to the slowest pace in two years, to 0.3% Q/Q, which is not that bad Y/Y being still 2.1%, but if you factor in the super weak Euro and the negative interest rate, its not that sexy anymore. But hey, the US tax cuts were such a bad idea!), GBPUSD 1.31 (the market expects a 25bp rate hike from the Bank of England tomorrow, but traders wonder if the hikes ever continue with so much political uncertainty – currently, May’s survival depends on the assistance of the Labour party destroying her remaining political capital), EURHUF (320.50), EURPLN (4.279), USDTRY (4.93, edging closer to another record low). Oil prices slipped from the key levels (WTI 68.40, Brent 74 USD), and Copper also took a hit on the Chinese news (down 16% YTD). To little surprise for regular readers, Washington joined the Pakistan-IMF dance with an unfriendly tone (US Secretary of State Mike Pompeo warned that  ’Make no mistake. We will be watching what the IMF does.’ and that ’American tax Dollars won’t be used to bail out China’. (Uhh. As expected, this will get tricky: China invested some 62 billion USD in Paksitan from infrastructure projects to simple survival lending – these are Dollar loans! – and it’s worth noting that Imran Khan was once dubbed ’Taliban Khan’ after turning more religious and called for cutting NATO supply routes through the country. To be sure, the market doesn’t see any problem for now: Pakistani USD bonds rallied 7% in July over the relief that there won’t be a hung parliament and – to put it cynically – the army’s position remains solid.)


  • The mainstream media has started to notice the quite obvious, namely that in the US, the Democratic party keeps moving to the left, while trying to copy Trump’s ’loud and authentic’ campaign: The favorite rising candidates are those who fit the progressive ideals – young, female, minority, ideally all three – in Michigan this weekend, Ocasio-Cortez and Abdul el-Sayed were running the show -, and preferably have a strong socialist message to attract Bernie Sanders supporters (free healthcare! away with border agency and prisons!, higher corporate taxes!). Personally I have my doubts if US swing voters are willing to leave the center so much (and imagine how energized Trump voters would be in 2020 to see this pair running), but the bottomline is that tensions are intensifying rapidly between the new ’young, socialist, brown’ and the ’old, white, estabishment’ parts of the Democratic party.



Have a nice day,



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