Market update: October the worst month for stocks in three years, oil prices drop, US-Russian talks speed up

24 Oct

by Mihály Tatár

 

Good Morning!

 

  • As expected here, global markets were anything but forgiving and October became the worst month in three years for stocks (SPX -7.2%, meaning its flat for the year, Nasdaq -8%, DAX -9% or -13% YtD, Italy -13% or -15% YtD, ’won’t slow down’ China -6% or -20% YtD). Tellingly, today the sentiment only improved a little (SPX -0.55%, Nikkei +0.51%, Shanghai +1.75%), when S&P shorts took profits at the key 2700 level and Trump said he ’maybe’ regrets nominating Powell, considering him ’the biggest risk’ to the economy. (Now nobody is laughing anymore when hearing the joke ’two more percent lower in the S&P and Trump sends the Fed leadership packing’.) Currencies were much less active (EURUSD 1.1470 – after the EU rejected the Italian budget but Rome said there is no ’plan B’, GBPUSD 1.2980 – still nobody knows how to trade the Brexit last minute negotations, EURHUF 323, EURPLN 4.297), and as forecasted, oil traders concluded the Saudi Arabian developments is actually a negative and sold aggressively (WTI 66.50, Brent 76.70 USD – the Saudi Energy Minister pledged to offset any supply shortfalls, probably not unrelated to Trump ’leaving up to the Congress’ to respond to the ’very bad original concept’ of killing the journalist, which was ’executed very poorly’, with the Saudis staging ’the worst cover up ever’, but not threatening with anything in particular. Strategists also note that Turkish President Erdogan – in a widely expected  speech promised to be a ’naked truth showdown’  – talked about Saudi King Salman deferentially – ’his denial of prior knowledge of the crime is sincere ’- , and did not even mention Crown Prince Mohammed bin Salman, which made traders wondering if a Saudi financial assistance for crisis-hit Turkey is in the pipeline.)

 

  • Quite much over of the media’s attention span, US National Security Advisor John Bolton sat down with Putin and made ’very productive’ talks, including setting a Putin-Trump meeting for the 11th of November (anyone yet remembers that the relationship will surely remain icy because of the mistakes Trump supposedly made at their first meeting?), and Bolton explaining that the US is pulling out of the nuclear missile pact because of China (!), not because of Russia. (He also made several other complains about Beijing – it will be interesting to see what Putin and Trump will ask from each other.) In the meantime, Merkel quietly gave in, and announced Germany will co-finance a liquified natural gas (LNG) shipping terminal in northern Germany to receive US gas, but ’it has nothing to do with US pressure’. (For sure. And just accidentally, the German foreign policy establishment is praying this will alleviate the pressure on Germany in the trade tensions. It won’t.)

 

Have a nice week,

Mihály

 

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