Market update: The US warns Turkey, exposed banks keep dropping, coal strikes back

14 Aug

by Mihály Tatár

 

Good Morning!

 

  • Markets tried but failed to start a correction on Monday (SPX -0.40% – after having failed miserably at the January record high despite the mostly great earnings; Nasdaq -0.25% – the Facebook theme got totally sidelined, but the stock is still in -17% mind you; DAX -0.53%, Shanghai -0.74% – another set of weak data confirmed that a serious slowdown is underway in China, keeping Copper and Zinc under pressure.) The Turkish Lira itself didn’t hit a new low and traded at 6.90 against the Dollar after some semi-serious central bank actions to contain the situation, giving other currencies breathing room (EURUSD 1.14, GBPUSD 1.2770, EURHUF 323, EURPLN 4.30) –  very tellingly, the most explosive market news of the day was that Turkey releases the detained pastor – denied only minutes later. (Instead, National Security Advisor John ’Bomb Iran’ Bolton warned Ankara that ’the US has nothing further to negotiate’ until the prisoner is freed. It’s worth mentionting that according to several analysts, Turkish banks are done above the Lira exchange rate of 7.00 – it’s no wonder that Turkey-exposed Spanish lender BBVA extended its YTD drop to -24% and somewhat-exposed Unicredit plunged to YTD -14% from already ’budget’ levels (-84% since 2010). Speaking of Italy, foreign journalist seem to be tired of covering the developments in Rome (I guess those pesky populists are not so exciting as expected for them), but investors remain wary (the Italian 10Y yield, now 3.10%, slowly trades higher, and the Italian stock market is down by 10% on the ’flat tax’ and ’make Brussels flexible on fiscal rules’ projects). In the general ’no-nonsense’ environment, crypto currencies continued to fare badly as expected, and Bitcoin crashed under 6000 USD (-58% YTD), with ’the better than Bitcoin’ Ether collapsing to 267 USD (-72% YTD). (Hey, but as we know it’s just a temporary setback until they go to 100.000 USD each – the entire Internet knows that!).

 

  • Geopolitical news were not really surprising but quite surreal  – Germany kept behaving like Iran had been its closest ally since World War II (Berlin sees no reason to stop large cash transfers to Teheran  – I guess a US retaliation will come as an ’unfair’ surprise as even Iraq decided to comply with the sanctions and companies from Daimler to Total are in rapid retreat), and in Afghanistan, the Taliban overrun a provincial city and killed more than 100 elite Afghan commandos on a single day, giving a good feel on what will happen after the US pulls out of the country.  (Pakistan seems to be quite nervous as well, and is sending about 60.000 troops to reinforce the Afghan border region, probably also as a gesture to Trump.)

 

  • Several commentators note that while the mainstream media is handling the coal industry as an ugly leftover from the 18th century (despite 30% of all electricity still coming from not-so-green-and-cool coal), a new generation of coal mines are popping up focusing not on energy but on high-tech carbon products from carbon fiber to 3D printing materials and chemical product components. Volumes of high-tech carbon could reach 100 million tons by 2020 (to put this into perspective, the US mined 725 million tons of coal last year).

 

 

Have a nice day,

Mihály

 

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