Market update: Stocks consolidate, beyond-terrible German data hits Euro and regional currencies

7 Feb

by Mihály Tatár

 

Good Morning!

 

  • Stock markets consolidated on Wednesday with investors taking some profit (SPX -0.22%, Nasdaq -0.36%, DAX -0.38%, Nikkei -0.67%), and currency traders not appreciating another set of beyond-terrible German data (factory orders -7% Y/Y, feeding the speculation that Germany actually contracted in the final quarter in 2018). The latter hit the Euro and regional currencies (EURUSD 1.1350, EURHUF 319, EURPLN 4.298, EURCZK 25.80), and strengthened the Dollar, with the market wondering if central banks are now forced to follow the Fed into a dovish U-turn. (Trump will be angry.) Note that retail sales across the region slowed down (the Romanian from 6% Y/Y to 2.7% in December, Czech from 3.3% to 0.1%, Slovakian from 5.4% to 0.6%, with the Hungarian holding up relatively well with 4.1% from 5.2%).  On the positive side, the investor expectation about the ’central bank perma-pause’, coupled with Italy’s fiscal submission allowed a highly successfull bond issuance for Rome (8 billion euros, attracting an order book of 41 billion), a good sign given that the mega-indebted country has to raise 250 billion euros in 2019 (!).

 

  • You know the US President’s State of the Union speech was quite a success when all the mainstream media could argue against it was that ’this wasn’t the real Trump’. In fact, the CBS poll showed a 76% (!) approval rating, while 59% of watchers polled by CNN judged it ’very positive’ (and these are the channels which can not be accused of having any sympathy for Trump). Apart from a very presidential tone, the most important takeways of the speech were that 1. Trump clearly understands that without the Wall, he has no chance in 2020 (’I will get it built’), 2. the new, dominant theme of the 2020 campaign emerged, namely ’choose me, or you choose socialism’. (As discussed before, it was a risky bet from Democrats to move so much to the left – they seem to calculate that they, too, have no chance without their ’wall’, namely the worldview of Bernie Sanders.) In the meantime, the EU had an active day: It escalated its tensions with the US by deportinga Turkish-born terrorist back to Turkey instead of extraditing him to the US which wanted him badly (this will have consequences), and EU President Donald Tusk provoked the UK by announcing that ’there is special hell for those who promoted Brexit without even a sketch of plan’. (This is a classic trumpian swipe – I suspect Tusk is secretely studying his tweets. However, while I get the point, and it certainly has elements of truth, Tusk would be in no position to make this joke if instead of the incompetent Theresa May, Donald Trump would be the Prime Minister responsible for Brexit. Just imagine.)

 

 

Have a nice day,

Mihály

 

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