Market update: US data refuses to cooperate with pessimists, extreme cold hits electric cars, Trump wants to stay in Iraq

4 Feb

by Mihály Tatár


Good Morning!


  • Making some fun of the ’US is recession, run for your lives’ narrative, Friday’s data showed a robust job market (304.000 jobs created in January even with the partial government shutdown) and a still expanding manufacturing sector (ISM 56.6). (Note that Germany is cooling to minimal growth and Italy is already in recession despite the -0.40% interest rate and the super weak Euro. This must be a mere accident and has surely nothing to do with the US tax cuts, deregulation and increased government spending. Hey, the Eurozone got fiscal discipline, Mifid II and GDPR.) The US data was actually a bad news for markets, as the positive sentiment is based on the dovish Fed, but luckily, Trump told the media that the US-China trade negotations go ’very well’, saving the day (SPX +0.09%, DAX +0.07%, Nikkei +0.36%, Hang Seng +0.21%, EURUSD 1.1450, WTI 55.10, Brent 62.70). The uptick in oil prices was also helped by the escalating verbal war between Venezuela and the US (Trump: a military intervention ’is an option’), with traders ignoring Rystad Energy’s forecast that the US oil production is going up so fast that it will surpass the combined production of Russia and Saudi Arabia by 2025 (!). (24 million bpd – that sounds somewhat optimistic, but it is true that forecasters vastly and systematically underestimated the rise in US production up until now.) Electric car users in the US felt quite some pain due to the extreme cold (we should really burn some more coal), and showing how emotional this topic has become, stock analysts blamed Panasonic and its batteries for the drop in Tesla cars’ performance instead of Tesla. The Forint went into correction quickly (EURHUF 317.70) on Friday attributed to a dovish presentation by Deputy Governor Marton Nagy in London – as discussed here, the MNB is not interested in a rapidly rising Forint and certainly doesn’t want to be the only hawkish central bank in town.


  • President Trump announced during an interview that despite the pullout from Syria, he wants to keep troops in Iraq to be able to watch Iran and protect Israel. (’We have an unbelievable and expensive military base built in Iraq. It’s perfectly situated for looking at all over the different parts of the troubled Middle East. (..) We are going to keep seeing if there is trouble, if someone is doing nuclear weapons or other things’.) This was certainly a big relief for Baghdad, Riyadh and Jerusalem – altough, for good measure, Iran just tested its new, 1350 kilometer-range cruise missile, capable of evading most anti-missile batteries. In the meantime, the military world was shocked last week when Germany kicked out the F-35 stealth fighter from the tender to replace its aging Tornado jets. While there is no denying that the F-35 is brutally expensive and high-maintaince, the rival Eurofighter is one generation older and can not carry nuclear weapons – which is a NATO obligation -, making strategists wondering who exactly thinks NATO is obsolete.



Have a nice week,



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