Market update: Car industry in focus as Chinese sales plunge and the EU threatens back Washington

19 Feb

by Mihály Tatár

 

Good Morning!

 

  • With the US on holiday (Presidents Day) on Monday, the trading week started in a slow fashion (DAX -0.01%, Nikkei +0.16%, Shanghai -0.51%, EURUSD 1.13, WTI 55.80, Brent 66.30 USD). The main theme was the fate of the auto market: Just when China reported a whopping 18% Y/Y plunge in passenger vehicle sales for January – but hey, the slowdown will be limited, keep walking people – a visibly nervous EU threatened the US with ’prompt retaliation’ if Washington imposes the 25% tariff on imported vehicles. (Note that this tariff would, for example, eradicate much of Germany’s expected growth for 2019 – that not too dynamic 1%, as it could shave off almost 10% of Germany’s car exports. While personally I hope a tariff-less compromise will be found, note that the EU’s problem is the same that of China: It can only strike back with self-humiliating things like not buying soy and LNG, simply because on an aggregate level the US is right and their trade relationship is extremely one-sided. Not to mention its not German troops defending the US for free, by the way. Furthermore, which I find the most depressing, is that Berlin seems to think that after the ’natural fall’ of Trump in 2020, things can go back to business as usual. This definetely won’t happen, once the geniue is out of the bottle, perceptions change, and not even the most liberal-freetrader Democratic Presidents – which don’t exist these days, by the way – will do the favour and just avoid this issue.) In other news, ECB’s chief economist Peter Praet promised that if the euro-area economy were to slow more sharply, the ECB ’would adapt’ – this was disregarded by traders as in itself it was seen as cheap talk – and Jean-Claude Juncker said ’We are in God’s hands’ regarding the Brexit negotations, as Brexit is only five weeks away. (My translation: God should give Britain a concession, but the EU won’t.)

 

  • While China announced its plans that after the moon trip, it wants to build a solar power station in space, and tensions exploded on the Indian-Pakistani border (four Indian soldiers and two militants were killed on Monday, India accused the Pakistani army and its intelligence agency ISI of organizing last week’s attack, to get a feel of the uproar, even Pakistani actors working in Bollywood received a storm of death threats), the US focused more on the ’Presidents’ Day disaster’: Namely, according to quiz polls, today only 27% under the age of 45 would pass a citizenship test. (For example, a stunning 44% of Americans don’t know who the US was fighting in World War II and only 43% knew who was Woodrow Wilson. Very typically, the US left blames the ’underfunded’ education system for this epic failure, carefully avoiding the obvious, namely that after waves of legal and illegal immigration in the last 50 years, many young Americans simply don’t have any connection with US history.)

 

 

Have a nice day,

Mihaly

 

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