Market update: Social media grilling continues, emerging currencies finally bounce

7 Sep

by Mihály Tatár

 

Good Morning!

 

  • The hammering of tech stocks continued (Twitter -6%, Facebook -2.5%, Google -1.4%, that is -36%, -25%, -9% since July), as their leaders – usually portrayed in the media as geniuses -, looked like deers in the spotlight during the US Senate grilling, and further not helping the sentiment, it was reported that 1 of 4 Facebook users deleted their apps, including a shocking 44% of the 18-29 year demographic. (But if you remember, ’the data scandal won’t have consequences’, as we learned at the time.) Trump was active too, and was quoted to warn Japan on unfair trade terms before the US-Japan trade talks late September, ensuring further selling (SPX -0.37%, Nasdaq -0.91%, DAX -0.71%, Warsaw -0.45%, Nikkei -0.84%, Hang Seng -0.30%). Making some fun of the investment gurus’ late advice from yesterday that the emerging market contagion is upon us, emerging currencies actually bounced (EURPLN 4.32, EURHUF 326, Brazil Real 4.05, Turkish Lira 6.58 per Dollar, even the Argentine Peso managed to strengthen. Being super oversold and with the Dollar still scratching its head what to do next after the Trump ’Dollar is too strong’ squeeze – EURUSD 1.16 – , all is set for a correction, at least in the ’not terminal case’ countries). What did not bounce and instead weakened further was the Russian Rubel (69.30 per Dollar, losing 2% yesterday and 24% since January, the 10Y bond yield also jumped to 9.13%), despite Russian officials promising emergency support, as traders, watching the latest nerve poison assassination videos assembled by the UK, fear another round of sanctions. (It’s worth noting, however, that Russia is not Turkey, government debt stands at only 13% of GDP and the country has 460 billion USD of FX reserves, not to mention oil.)

 

  • Even Bloomberg notes that despite the permanent talk of the trade war hitting back at the US, in several areas US exports are increasing rapidly. A good example is the global shipment of liquefied petroleum gas (LPG, used for heating, cooking and as petrochemical foodstock), which jumped 58% in August – making the US the world’s biggest exporter of propane. (This comes even as China doesn’t take any cargoes as a retaliation for tariffs, and instead purchases from the UAE and Qatar.)

 

  • Thursday was a rich day in terms of foreign policy signallization: Russia warned the US ’to get out of the way’ and ’stop protecting militants’ in the strategic Al-Tanf zone (Southern Syria), the intimidation sparking a US counterthreat to not to ’challenge the US military presence’. The UK Navy sailed its warships close to South China Sea islands claimed by China, and China was also busy, by announcing it will train Afghan troops (!), hinting at a military alliance with Kabul, and for good measure increased the testing of hypersonic ballistic missiles. In the meantime, in Europe, Macron is trying to form an alliance of ’cooperation of progressive, anti-nationalists forces’ – so far Belgium and the Netherlands are on board – , to counter the anti-immigration and anti-EU-centralization member states from Italy to Hungary. In this regard, this Sunday’s Swedish elections will be important – if even the Swedish voters reject the pro-immigration establishment and its ’moral superpower’ (600.000 migrants arriving within 5 years to the country of 10 million), the ’few spoilers’ narrative is in trouble.

 

 

Have a nice day,

Mihály

 

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