Market update: All eyes on the Fed and trade talks, Apple has a China problem, new oil sanctions freak out Moscow and Beijing

30 Jan

by Mihály Tatár

Good Morning!

 

  • Waiting for today’s Fed meeting and the results of the top level US-China trade talks, investors decided to just sit on their hands (SPX -0.15%, Nasdaq -0.81%, DAX +0.08%, Nikkei -0.37%, Hang Seng +0.02%, EURUSD 1.1440). (Regarding the Fed, tonight it will debut its new communication strategy – Powell will give a media briefing 30 minutes after announcing the meeting decision.This is meant to ’give the public a better understanding’ – or rather, decrease the amount of frantic trading after Fed meetings and decrease the risk of ’misunderstanding’ – as we know, on these markets it takes only one overly hawkish line in the statement and stocks fall like there is no real economy). Apple, for a change, staged a relief rally (+6%), after somewhat beating its several times down-revised forecasts (but note that the company’s China sales dropped a whopping 27%, or 5 billion USD in sales, in the holiday quarter. Anyone remembers the forecasts that the Chinese slowdown will be a mere 0.5%?). The victim of the day was the British Pound (GBPUSD 1.3060), after Theresa May promised to renegotiate the infamous ’Irish backstop’ part of the Brexit agreement. (The EU stayed true to its trained-to-perfection negotiation tactic, declining to reopen the deal but at the same time hinting certain concessions. The majority of traders still hope the end result will be a Brexitless Brexit, either by a new referendum or by the final deal looking like a staying in all but name.) Tellingly, Gold jumped to 1315 USD – it seems not all is well in the eyes of the market despite the monster January rally, and many want to hedge. The Forint slightly strengthened further (EURHUF 317.10), after the Hungarian Central Bank ofered little new in its rate setting comments, but that was seen as a nod to Forint appreciation and many expect a hawkish action in March. (As a sidenote, I understand why the MNB is not panicking on Forint strength. EURHUF came down a mere 4% in six months (!), often barely moving for weeks. The Swiss Franc looks like a wild crypto currency in comparison. Furthermore, speculative positions became one-way and long last year, and who doesn’t want to make some fun with those. That said, a too-strong Forint, as said before, is not in the MNB’s interest.)

 

  • While in the US, Democrats kept moving the left (Ocasio-Cortez: ’the world is going to end in 12 years if we don’t address climate change, and your biggest issue is how we are going to pay for it?! ’, meaning, shut up and support green socialists, with Democrat presidential contender Elisabeth Warren also proposing a wealth tax on the super rich. It seems that in 2020, everyone wants to emulate Bernie Sanders and try to beat Trump with a socialist platform. Don’t buy anything that works longer than 12 years.) Russia and China had more immediate problems: Moscow, clearly at pain, condemned the ’illegal’ US sanctions on Venezuela’s oil (they own 49% of PDVSA, the state oil company), with Beijing also visibly angry (they are owed even more money than Russia), as some officials in both capitals are suddenly awakening to the reality that these debts might be never ever get repayed.

 

 

Have a nice day,

Mihály

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