Market update: Profit taking in stocks, Trump verbal intervention in oil, Pound surges after latest U-turns

26 Feb

by Mihály Tatár

 

Good Morning!

 

  • The rally gradually fizzled out on Monday (SPX +0.12% – traders noted that it bounced back from the key 2800 zone, Nasdaq +0.36%, DAX +0.42% – German automakers had a great day, Volkswagen +3%, Daimler +2.4%, European automakers +2% – it tells you volumes that these stocks represent a cheap China growth play these days, Nikkei -0.36%, Shanghai -0.86%, after yesterday’s monster 6% rise). The main event was Trump’s verbal intervention in oil markets (’Oil prices getting too high! OPEC please relax and take it easy. World cannot take a price hike -fragile!’), which bombarded back already overbought and overloved WTI from 57.50 to 55 USD and Brent from 67.50 to 64.30 USD. (As strategists note, Trump is keen aware of the recession risk before 2020 – note that it just came out that in December, world trade dropped the most Y/Y since 2012 – and just as the Fed last year, OPEC better creates a Plan B. The NOPEC /’No Oil Producing and Exporting Cartels Act’/ is already before Congress. One also has to wonder if the draconian International Maritime Organization rules – distorting the diesel market – will be left untouched.) The Pound surged (GBPUSD 1.3130), after the leak that May is considering delaying Brexit and that the Labour Party is now behind a second referendum. (This possibility was raised here several times, it seems both May and Jeremy Corbyn thought it was necessary to create a dramatic last minute sentiment before going into this gamble. As history books will tell your children, this happens if you task Remain politicians to execute a Brexit. Also, I am not sure what secret polls May and Corbyn are reading, but what will they do if the result is the same? Start again negotations with the EU? Ha.) Otherwise, most currencies remained motionless (EURUSD 1.1350, EURHUF 317.70, EURPLN 4.337), and even Gold retreated (1327 USD), despite Indian fighter jets striking ’a major terrorist camp’ inside Pakistan, a first since 1971. (Islamabad described the event as ’grave aggression’, but also said there were no casualites or significant damage. Given that India has sent a dozen Mirage jets to this mission, its either the report was doctored or there was some kind of deal before the strikes.)

 

Have a nice day,

Mihály

 

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