Market update: Stocks rise on trade deal hopes, Dollar weakens, attacks on Huawei seen as coverup

28 Jan

by Mihály Tatár

 

Good Morning!

 

  • Market sentiment finished on a high note on Friday (SPX +0.85%, Nasdaq +1.29%, DAX +1.36%, Shanghai +0.16%), with traders hoping that this week’s high level US-China trade talks will end with a breaktrough (in the meantime, Chinese industrial profits data cascaded lower as well). It also helped that the Fed leaked through the Wall Street Journal that it might target a larger balance sheet than originally planned – this is, of course, if true, is a dovish intervention -, and Trump announced a temporary reopening of the government. (We might not know yet what is really going on in the background, but on the face of it, it looks politically damaging for Trump, who just got his most loyal lawyer, Roger Stone arrested. As said before, no amount of trade victories can replace a Wall in 2020 for Trump, and by now even mainstream media outlets admit that Hispanics’ view on the Wall is much more complex than that of the Democratic party). However, stock markets were much less interesting compared to what went on in currencies: The ’now even Draghi is pessimistic on the Eurozone’ EURUSD just tested the key-to-the-downside 1.13 level  when the Dollar began to agressively weaken (EURUSD 1.1420, USDHUF 278, USDPLN 3.75) ending the week with a huge U-turn. (Why? As always everyone has a reason, from the Fed news to a secret ECB intervention to the Roger Stone arrest – personally I would just repeat that nobody is interested in an even stronger USD.) Helped by the weak Dollar and the notion that there won’t be a real Brexit, the GBP became the star currency and rallied above 1.32 against the Dollar, while EURHUF was sieging the important 317.50 level. In commodities, oil prices, as usual these days, followed stocks (WTI 53.10, Brent 61 USD), and so did Copper (+2.3%), while Aluminium performed ’a healthy drop’ after the US lifted sanctions on Russian aluminium giants Rusal, EN+ and EuroSib.

 

  • While at Davos, shocking its audience, George Soros attacked China in a tone usually reserved only for Vladimir Putin (he seemed to be completely unaware of the fact that his open societies helped China become what it is today), and in an ironic development, Canadian PM Trudeau had to fire his ambassador to China (who seemed to be trying to get good points in Beijing by questioning the Canadian decision to arrest the Huawei CFO and bashing Trump, humiliating his entire country). In the meantime, Arab countries seemed to be mad angry at Russia, which ’forgot to switch on’ its S-300 anti-air batteries when the Israeli warjets bombarded Iranian targets in Syria last week – I smell a deal in the air –  and strategist note that the campaign from US intelligence agencies to stop Huawei seems to be too little, too late, and looks more like a coverup of a gigantic failure than a carefully executed plan: By now Huawei is everywhere from Mexico to Eastern Europe, is set to dominate 5G including its tapping capacity and industrial usages,  and with Beijing’s investment money helping its way, few will listen to Washington and chose its tiny Scandinavian competitors. (This situation is actually similar to the latest ’Merkel and Macron speeches’ calling a European army: Sounds nice, until you realize this talk has been going since the early 2000s, and nobody talks about the price, namely investing hundreds and hundreds of billions of Euros into advanced weaponry and technology.)

 

Have a nice week,

Mihaly

 

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