Market update: Investors panic and run for the exits, Trump supports MBS

21 Nov

by Mihály Tatár

 

Good Morning!

 

  • Traumatized by Monday’s brutal selling, investors kept running for the exits to save what was left from this year’s return, resulting in another plunge (SPX -1.82% with all sectors falling – meaning, there was not even a rotation to defensive stocks, the index is now negative for the year; Nasdaq -1.70% with everyone’s pension favorite Apple dropping 5%; DAX -1.58% – European stocks fell to a 2-year-low; Warsaw -1.26%, Nikkei -0.35%). Both investment grade and junk bond spreads catapulted higher (showing credit sentiment deterioating rapidly, this always makes central banks worry), oil detonated lower (WTI 54, Brent 63.20 USD, blamed on the equity sell-off), the crypto carnage continued (Bitcoin another -10% to 4300 USD, with wild stories of crypto miners throwing their hardware out of office windows. I guess this is good news because Earth will save a lot of electricity, and a lot of young people will now learn how to write CVs). Bank stocks were tortured, too (Eurozone banks -3%, that is -27% for 2018), with ‘every issue solved’ Unicredit dropping to a fresh low and ‘great new leadership’ Deutsche Bank crashing to a record low – 8 euros, remember, it used to trade at 80 euros back in 2007 – helped by another messy money-laundering scandal. What was remarkable that the money this time didn’t flee into safe haven bonds (US 10Y yield 3.07% – this confirms my personal view that this time US bonds will gain little from the bear market), and that currency markets did actually very little (EURUSD 1.1380, EURHUF 321.50, EURPLN 4.308, essentially saying, ‘what problems?’). Somewhat funnily, market analysts and talking heads – usually hating Trump without limits – are now in 100% agreement with him in that the Fed is responsible for the meltdown and that it has to intervene as soon possible. (Don’t hold your breath: Even vague Fed promises about fewer hikes would only result in a temporary relief rally. I suspect that is also the case if there will be a  US-China understanding at the G20, which many now expect.)

 

  • Caring little about journalists’ sensibilities, Trump announced that he won’t let the murder of Jamal Khashoggi jeopardize relations with Saudi Arabia, as they were a strategic and business interest, even adding that otherwise ’oil prices would go through the roof’. (Danger, truth-talker! For starters, hitting the Saudis is the best way to create a Russia-Saudi Arabia alliance). This will probably result in a media rage-fest (altough I don’t remember such an enthusiasm for human life regarding China or even Mexico), and as geopolitical strategists note, there is now clearly a global campaign underway to re-vitalize the scandal before the G20 and put maximal pressure on Mohammed Bin Salman and Trump’s anti-Iran alliance (the supposedly CIA-leak, the colorful Turkish media reports, Democrats going full-in about Saudi sanctions). The Iranian angle, however, is clearly having problems – Brussels was forced to back French sanctions on Iranian intelligence assets, after agents tried to blow up a rally near Paris (what a cool trading partner).

 

Have a nice day,

Mihály

 

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