Market update: Investors nervous before the US mid-term elections, discontent grows in France

6 Nov

by Mihály Tatár


Good Morning!


  • Traders and investors hit the brakes with the day of the US mid-term elections arriving, with stocks diverging (SPX +0.56%, Nasdaq -0.38%, DAX -0.21%, Nikkei +1.08%, Shanghai -0.91%), and currencies with commodities going nowhere (EURUSD 1.14, EURHUF 322, EURPLN 4.304, EURCZK 25.80, WTI 63, Brent 73 USD). The stakes are indeed high: From US tax cuts to the Trump infrastucture plan, to bank regulation – a certain Democrat leader already threatened ’to do to banks what banks did to us’, to the relationship with Russia and building the Wall – which would be the most symbolical development in the West since the fall of the Iron Curtain, and make no mistake, the first wall of many to follow – everything will be affected. (An interesting exception is the trade war with China – that motion seems to enjoy bipartisan support, but a weakened / strengthened US President will be noticed by Beijing, which is by now criticized even by the mainstream media and the EU for only talking about opening up its markets but never actually doing it. What a difference two years make. Also, if you discount the anti-US sentiment in Europe, it is Germany that will lose the most if the ’Made in China 2025’ initiative is executed.) The majority of pollsters still expect Democrats taking the House but failing to take the Senate – but remember the giant blunder of 2016, and bank analysts learned the lesson, and this time they also give ’20% of probability’ of a large Democrat or Republican win, meaning, they have no idea really. (Personally, I would only point out that contrary to what most of the journalist seems to implicitly believe, people are not just emotionally-driven animals: They do tend to choose between options. What do the Democrats sell here? Higher taxes, status quo on immigration and more verbal aggression until 2020? Russian hackers and trolls must be working overtime and Trump has to call Moscow twice a day for help to be able to counter this ’great’ package! And by the way, Le Pen’s far-right party in France just overtook Macron’s in the polls (!), which is a dramatic development, and shows how critical the immigration / national identity issue has become, just when Friedrich Merz, the strongest contender to be the CDU head in Germany, is campaining with even stronger EU integration including an EU-wide unemployment insurance and a Eurozone-coordinated budget policy. (In fact, he is seen so positively by bank analysts compared to his peers that some forecast EURUSD at 1.32 with him. Hard to see without major concessions to Italy.)


Have a nice day,



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