Market update: A bounce before Thanksgiving and on Fed hopes, all eyes on China

22 Nov

by Mihály Tatár

 

Good Morning!

 

  • After this week’s selloff, investors were happy to leave for the US Thanksgiving holiday, and stocks bounced on the talk that the Fed might pause with rate hikes as soon as next year (SPX +0.30%, Nasdaq +0.92%, DAX +1.61%, Warsaw +2.26%,  Nikkei +0.77%, Hang Seng +0.04%.  How comfortable! – and considered as great news, US durable goods orders fell by 4.4% in October, fitting the slowdown narrative. Note however, that the Fed is not responsible for investment returns. Raising two times instead of four in this cycle, let’s say, is far from easing again.) Making some fun of analysts and journalists, the EU’s announcement that Rome violates EU rules and starts the disciplining process actually made Italian bonds and stocks rally (10Y yield 3.47%, MIB +1.41%, given this was the priced in scenario and Rome made compromise-sounding remarks. In reality, of course, everyone knows that an actual fine on Italy will take ages to agree on, not to mention would be a political suicide. The key question remains, rather, who and at what price will purchase the 275 billion euro fresh debt Italy plans to issue in 2019 and whether the ECB will keep Italy’s bank sector on life support? Unicredit is already discussing  whether it should split its Italian operations from those everywhere else, with a new headquarter in Germany.) Oil prices tried hard to stabilize after the latest stop-clearing drop this week (WTI 54.50, Brent 63.20 USD – Brent came down 28% within six weeks), with Trump’s latest tweet not helping the sentiment (’Oil prices getting lower. Great! Like a Big Tax Cut for America and the World. Enjoy! (..) Thank you Saudi Arabia, but let’s go lower!’). However, as discussed before, the focus is now less on the Saudi / Iranian angle and more on China: It tells you volumes that the two key trader news items this morning  were 1. Trump not inviting his China-hawk trade adviser, Navarro, to the next trade talks at the G20 – a gesture of goodwill – , while Beijing suddenly allowed a US fleet to dock in Hong Kong. 2. Foxconn now openly talking about 2.9 billion USD of cost cuts on weaker orders. (Foxconn is the giant Chinese assembler of everything from Apple iPhones to Sony products).

 

 

Have a nice day,

Mihály

 

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