Market update: US job market forgets to slow down again, Trump threatens all Chinese imports

10 Sep

by Mihály Tatár

 

Good Morning!

 

  • Once again, the US economy refused to cooperate with the slowdown narrative (it seems those ’awful’ Trump tax cuts counter even the best of pseudo science, to no surprise for regular readers): 201.000 jobs were created in August, at an unemployment rate of 3.9% and with wages picking up 2.9% Y/Y, the most since the recession ended in 2009. This, of course, ruined the day for stocks  – the higher wages coupled with a more hawkish Fed, and further not helping the sentiment, Trump massively increased the pressure on China by threatening tariffs on another 267 billion USD worth of goods – basically covering all Chinese imports, and recommending a 20% tariff on autos from Canada (SPX -0.22%, Nasdaq -0.25%, DAX +0.04%, Warsaw -1.52%, Shanghai -0.98%). (It’s worth noting that this is a decision point for China – it simply doesn’t import enough to retaliate, at least officially, and even what it does import it doesn’t want to hit with the tariffs – for example, China just became the world’s biggest natural gas buyer, overtaking Japan, a 25% tariff on US gas imports will hurt China much more than the US.) The US employment data propelled the Dollar (EURUSD 1.1540, GBP 1.29, RUB 70 – its record low was 86 in 2016, ’great hedge’ Gold got crushed to 1190 USD), and Dollar yields higher (US 10Y yield 2.94%), also causing an upward bounce in oil prices (WTI 68.10, Brent 77.20 USD). Regarding the latter,  traders noted that South Korea has cut its oil imports from Iran to zero from 200.000 bpd and unnamed US officials warned that in Syria, government forces already received permission to use poison gas against the rebels in Idlib, a red line for the US and increasing the chances of an intervention. In the meantime, Iraq announced that is it now exporting a record 3.59 million barrels per day of crude oil – but the news was sidelined by the violent anti-Iran riots hitting Basra (dozens were killed in the clashes and even the Iranian consulate was set to fire. Pro- and anti-Shiite militias were fighting in several cities. Iran, naturally, blamed the CIA – but the root causes are of course much deeper than that, resulting in the former Saddam regime to begin with).

 

  • European banks, on the other hand, fell to a 22-month low, not really confirming the ECB’s post-crisis victory tour (YTD European bank index -22%, Unicredit -17%, constantly reborn Deutsche Bank -40%, BNP -19%, hit by several scandals ING -28%, Raiffeisen -21%, to name just a few), and this looks especially weak given that normally a set-to-raise-interest-rates central bank is a cause for a bank rally in itself.

 

 

Have a nice week,

Mihály

 

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