Market update: US expansion surprises pessimists, Trump sending a message in Hanoi

1 Mar

by Mihály Tatár

 

Good Morning!

 

  • As discussed earlier, pessimists were too loud and the market was pleasantly surprised by the US growth data on Thursday: That deregulation-hit, unfair tax cut devastated, military spending cursed US economy advanced by 2.6% Q/Q in the fourth quarter, meaning a 2.9% yearly growth for 2018. (This compares with Germany’s 0.0% and 0.9%, respectively. Personal consumption expanded by 2.8% in Q4 – in Germany, by 0.2% – and non-residential business investments accelerated to 6.2%. In fact, this was the largest growth advance since 2005. Yes, that includes all the Obama years.)  Naturally, US yields advanced (10Y yield 2.72%), dragging the USD and oil prices with them (EURUSD 1.1370, WTO 57.60, Brent 66.80 USD). In stock markets, US traders were a bit taken aback – the key 2800 zone in S&P still blocks and if growth is underestimated, will not the Fed tighten later this year, hurting stocks? – , while the rest of the world was happy about the news (SPX -0.28%, Nasdaq -0.29%, DAX +0.25%, Nikkei +1.02%, Shanghai +0.64%), with strategists not missing the fact that Trump walking out from the North Korea talks in Hanoi was in fact a very clear message to Beijing. (What happens if they don’t compromise in the trade talks. There is probably a huge reassesment going on in China right now.) In the meantime, regional currencies continued to strengthen (EURHUF 315.90, EURPLN 4.304, EURCZK 25.62), the visible panic among some tory lawmakers that if they don’t vote for May’s ’phantastic’ Brexit plan there might be no Brexit at all curbed back GBP enthusiasm (GBPUSD 1.3250), and Trump announced that US-led forces took back 100% of ISIS territory in Syria. (Where are the congratulations, the celebration, especially from human rights organizations? The inhuman horror show – and ISIS controlling over 100 000 kilometres of territory in Syria and Iraq – is over.)

 

 

Have a nice day,

Mihály

 

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