Market update: Bad news for the UK, Russia grows even faster, New Green Deal pushed in the US

5 Feb

by Mihály Tatár

 

Good Morning!

 

  • With most Asian markets being on Lunar New Year holiday, the week started in a slow fashion, with traders still feeling the warmth of the Fed capitulation and hoping an imminent US-China trade deal (SPX +0.68%, Nasdaq +1.15%, DAX -0.04%, Euro Stoxx -0.19%, Nikkei -0.21%, EURUSD 1.1430, Brent 54.80. WTI 62.70 USD, EURHUF 317.30, EURPLN 4.285). (To put the recent moves into perspective: S&P fell 20% in late 2018, but since January, it has regenerated itself to -7%; DAX has lost 22% and rallied back to -15% – quite an underperformance -, Shanghai plunged 33% during 2018 and now bounced back to -26%.) The Pound remained under pressure (GBP 1.3040), with the EU pulling another ’it’s up to the UK to clarify its intentions about the next steps’ on Theresa May. Further humiliating the UK, Nissan abandoned its plans to expand production in the UK despite a 61-million-GBP sweetener, showing how much the uncertainty is killing the investment appetite. (That said, confirming the suspicion that under May, any Brexit will look like an EU membership of a lesser degree, the Bank of England and the EU regulators quietly agreed on the cooperative oversight of derivatives clearinghouses. If anyone remembers, the City suddenly losing the clearing rights used to be a fear-inducing argument against Leavers. One has to wonder what the UK gave in return.) The Russian Rubel extended its gains (RUB 65.568, or 6% this year), helped by the strong oil prices and with the Russian economy expanding even faster than previously thought (2.3% Y/Y in 2018 with especially services and local mid-companies booming. That’s not Poland’s breathtaking 5.1% – but its strong growth and remember we were told by analysts the economy won’t come back after the sanctions.)

 

  • While in a rare intervention, the US bombarded Iranian military targets on the Syrian-Iraqi border (to send a message after pro-Iranian militias received missiles to attack a US base), and while an anxious Chad called for French air strikes against a militant convoy invading from Libya, the Democrats in the US were busy marketing Alexandria Ocasio-Cortez’s Green New Deal among lawmakers and journalists. (Judging from mainstream newspapers, ’young people don’t want to die because of your lazyness’, the latter is going well.) Altough personally I would be a great fan of more practical environmental protection (1700 private jets flying to Davos, anyone?), and more really green energy, you know that the relationship with reality went wrong when you read lines from  the text like this: ’Achieve net-zero greenhouse gas emissions, (..) create millions of good, high-wage jobs and ensure prosperity and economic security for all. ’ Who dares to argue with that? In the meantime, Amazon’s driverless trucks are now test-driving 650 miles on the highway.

 

 

Have a nice day,

Mihály

 

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