Market update: Chinese trade data beyond bad, Trump threatens Turkey, traders preparing for Brexit vote

14 Jan

by Mihály Tatár

 

Good Morning!

 

  • The giant January rally met its first profit taking when the Chinese trade data turned out to be way beyond bad – exports dropped 4.4% Y/Y and imports 7.6% Y/Y in December, this is not something you see everyday (SPX futures -0.76%, DAX futures -0.72%, Shanghai -0.91%, Hang Seng -1.62%, with commodities also turning down, WTI 51, Brent 59.80 USD.) (The ’normal’ reading of Chinese exports used to be a rise by double digit percentages – anyone yet remembers those funny-witty mainstream journalists who pointed out that Chinese exports to the US are higher since the Trump trade war? As discussed here at the time, it was evident that those numbers reflected the final front-loading of shipping, and the journalists are not laughing anymore. On the positive side, the pressure on the communist party to do something must be enormous – mind you, today’s Chinese are used to an ever-expanding economy and constantly rising living standard.) Currency traders focused on the fateful Brexit deal vote scheduled for tomorrow (GBPUSD 1.2850 – this time its  the Tory remainers who are rebelling, wanting to seize legislation and overturn the entire process – hey, who cares about voters anymore, who gave poor Theresa May a mandate to get out, not once but twice), and selling the Turkish Lira (USDTRY 5.53), after Trump threatened Ankara that he will ’devastate Turkey economically if they hit Kurds’ (!). (Altough, he balanced this later by also warning Kurds not to provoke Turkey.) Note that as forecasted, the real face of the Trump foreign policy is now emerging – very fast-paced, nasty, transactional, potentially effective but not caring too much about diplomatic sensitivities or traditional relationships. (Brussels, Berlin, better watch out. He ain’t Theresa May.)  In the meantime, quite entertainingly, ex-Secretary of Defense Mattis’s leaving loyalists are leaking several ’shocking’ information to the media, for example that Trump and Bolton ordered detailed plans on striking Iran last year and on how to destroy Teheran’s oil tanker-threatening gunboats, from the Pentagon. This tells you volumes about that 1. This counts as a story and it seems nobody in those circles seriously thought an attack could happen, despite the White House rhetoric. 2. The US has been indeed worried about Iran’s ability to shut down oil transportation in the region for a decade now, but nobody, apart from Trump, saw this as humiliating or as something that needs to be dealt with.

 

 

Have a nice week,

Mihály

 

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