Market update: No disaster at the US-China talks, economists shocked at German and Chinese growth, Amazon disappoints

1 Feb

by Mihály Tatár

 

Good Morning!

 

  • Less enthusiastically, but investors remained in a positive mood (SPX +0.86%, Nasdaq +1.37%, Nikkei +0.13%, Shanghai +0.93%), as the US-China talks were reported to have finished in a constructive fashion and the next round is scheduled for mid- February. So far, China vowed to substantially boost imports from crops to services and energy, the tough topic remains tech transfers and intellectual property rights. (One has to wonder what the mainstream media will say if a deal goes through? That Hillary would have done the same?) Anyway, the economic data coming out from China remained terrible, with the manufacturing PMI dropping to 48.3 (fast contraction!) – the only positive about this was that traders are now hoping an immediate, large-scale monetary and fiscal stimulus from Beijing. Europe underperformed, again (DAX -0.08%, EURUSD 1.1440), after Bundesbank’s Jens Weidmann warned that Germany’s economic weakness will result in significantly lower growth than predicted just a few weeks ago. (While Weidmann insisted that he doesn’t see a sudden slump or longer phase of declining economic activity, bank economists are already behaving as if the ECB would be forced to change plans like the Fed during 2019. You are forgiven to wonder if the Japanification of the West is now complete.) In the meantime, once-mighty Deutsche Bank suffered its eighth straight revenue contraction – the turnaround is just not happening, the stock dropped to 7.7 euros, or 4%, a far cry from 2007’s 80 euros – and many now expect a radical solution, like a shotgun merger with Commerzbank, once ruled out as a wild speculation. Amazon also delivered a disappointment – as discussed here before, it was priced in for eternal growth – , its share price dropped 5%, and predictably, it was blaming China and India for not reaching targets. (Cruel traders are of course making jokes that Bezos’ sudden and crazy divorce is to Amazon what the data scandal was for Facebook, a bad omen and a confirmation that the emperor has no clothes.) The economic pessimism offset the Venezuela theme in oil prices (WTI 53.70, Brent 60.90 USD), with the latest news being that the EU recognized the head of opposition, Juan Guaido, as interim president (after making sure other countries from the US to Brazil have already done that), and that Guaido is already in talks with the military.  (It is claimed that the regime threatened Guiado’s family – if true, the leadership is getting desperate.) Talking of oil, Germany, the UK and France announced they have set up the long-in-the-making transaction channel with Iran (INSTEX), prompting every commodity trader company looking warily at Washington and at how the adminisration reacts.

 

 

Have a nice day,

Mihály

 

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