Market update: Traders sell to pass time, tensions jump in the Ukraine, Arctic traffic surges

4 Sep

by Mihály Tatár

 

Good Morning!

 

  • With the US on Labor day holiday, stock traders rather didn’t take risks (DAX -0.14%, Warsaw +0.19%, Nikkei -0.13%, Shanghai -0.16%), and currency trading focused on the usual themes: The Indian Rupee hit a fresh record low against the Dollar (despite the country growing by a whopping 8.2% in the second quarter, I guess this must be another sign of the global slowdown for some), the British Pound was hammered again (1.2850 after British manufacturing growth ’unexpectedly’ slowed down despite the super weak GBP), the Iranian Rial crashed to a new record low as well to 128,000 per Dollar, while the Turkish Lira stabilized somewhat (6.60) on the central bank’s comments that the ’monetary stance will be adjusted’ at next week’s meeting (whatever that means – note that Turkish official inflation just jumped to 18% Y/Y). Italian bonds were sold again (10Y 3.24%) after Deputy Prime Minister Salvini reiterated that regarding EU fiscal rules, ’the well-being of Italian citizens come first’ (meaning, the flat tax and the big spending projects are good to go) and his Five Star collegaue Di Maio doubled down on ’citizen’s income’ (basically a big handout). It’s worth noting that the League’s popularity is still in a steady uptrend, it now polls at 30.3% (it got 17% of the votes at the elections), contradicting the expectation in Brussels that it only needs to be patient to get rid of this of government, too. The EURUSD itself didn’t move from 1.16, and oil prices remained well supported (WTI 70.20, Brent 78.15 USD) – the latter attributed to the approaching  Gulf Coast storms, but I suspect Trump’s latest tweet (’President Bashar al-Assad of Syria must not recklessly attack Idlib Province.’, as it would be a ’grave humanitarian mistake and human tragedy’) wasn’t a Sell either.

 

  • In a furthern sign that the situation in the Ukraine will only deteriorate until a ’US-Russian big bargain’, as strategists call it, just when Ukrainian-Russian tensions exploded on the assassination of seperatist leader Zakharchenko (for which Moscow accused Kiev), Washington announced to drastically expand its military assistance to the Ukraine, including  the delivery of weapon systems from drones to radar systems and high-tech naval weapons. (Now we know where the military aid from Pakistan is redirected to – personally I suspect this was a step to punish Russia for its uncooperation in other areas. Also, lately pro-Putin politicians reappeared in Ukraine, including Viktor Medvedchuk, dubbed as ’Prince of Darkness’ by pro-Americans in Kiev, who is also godfather to Putin’s daughter. )

 

  • As reported first last year, more and more commentators note the upside of global warming: Arctic ports around the Northern Sea Route are experiencing a surge in traffic (80% Y/Y !, to 10 million tons). The significance of this for Eurasian trade could be enormous: A well-organized Northern traffic from Shanghai to Hamburg, for example, would save as much as 6,000 kilometers and  two weeks in shipping time (compared to  the traditional Suez canal route).

 

 

Have a nice day,

Mihály

 

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