Market update: Trump overdelivers on sanctions, Pound rally continues, self-driving cars at dead-end

18 Sep

by Mihály Tatár

 

Good Morning!

 

  • The markets didn’t appreciate the fact that Trump actually overdelivered on the new China sanctions, imposing a 10% tariff on 200 billion USD of Chinese goods from next week and automatically increasing it to 25% (!) at the end of the year if there was no trade deal (SPX -0.56%, Nasdaq -1.43%, DAX -0.23%, Warsaw -1%, Hang Seng -0.74%, Shanghai -0.10% – the latter means -33% since January for Chinese stocks and the lowest level since 2014). To make sure that he went all-in, Trump also announced that in case of a retaliation from Beijing, new tariffs will be put on the remaining 267 billion USD of Chinese imports as well – I suppose this is a wonderful opportunity for economists to test non-zero-sum-game trade models and game theory, but nobody looks happily excited. (Where is the scientific curiosity?) Oil prices didn’t like the news either (WTI 68.60, Brent 77.60 USD), the move lower also helped by Russia’s sudden U-turn on Idlib: Caving to US and especially Turkish pressure – not to mention the demonstrative military buildups -, Putin agreed to a cease-fire and to a buffer zone around Idlib, calling off the campaign to obliterate the last rebel stronghold after meeting with Turkish President Erdogan. (Some geopolitical strategists also mention that by now, the Syrian army is at a critical low, and it did not hurt for the Syrian/Russian/Iran alliance to wait a few months more.) In currencies, the Pound rally continued (GBPUSD 1.3150) on the impression that the Brexit-deal-light has only minor obstacles before it can be passed, like the exact procedure at Irish borders – but showing how worried the EU really is that it might not get away with this deal on the long term, Brussels is said to demand ’credible assurances that the UK won’t try to renegotiate later’. (Afraid of Borish Johnson and Rees-Mogg, or what?) This also helped the Euro (EURUSD 1.1690), while the Turkish Lira weakened somewhat despite the monster rate hike (6.33), and the Forint waited for the central bank rate decision and monetary announcements at 325 per Euro. (In short, investors are wondering if there is any change towards hawkishness from the Hungarian central bank, now that we know what the ECB is planning and how easy it is for the Forint to weaken.)

 

  • Bloomberg notes that despite the hype of the last few years, ’the driverless car of the future’, as things stand today, can’t even hundle a mid-sized rain or snow. (Somewhat embarrassing when the expectation is that the smarter AI will overtake intuitive human skills.) This problem seems to be unsolvable – mind you, it’s no wonder most tests are done in dry places like Arizona – since today autonomous cars rely on such simplistic sensors like GPS, cameras, radar and lidar lasers. (Cameras are useless in snow and fog, GPS connections are anything but reliable, while radars and lasers have trouble with distinguishing obstacles especially at high speed, double so in unfriendly wheather.) (Personally I would also add that driving is a human interaction, with lots of social-cultural decisions involved, but that of course is not an interesting topic for the researchers.) The current thinking is that new type of sensors could lift the projects from their dead-end – for example ground-penetrating radars, originally developed by the military to find land mines and spot enemy bunkers.

 

 

Have a nice day,

Mihaly

 

 

 

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