Market update: Investors retreat, US trade deficit jumps, OECD cuts growth outlook again

7 Mar

by Mihály Tatár

 

Good Morning!

 

  • As the mood switched from FOMO (’Fear of Missing Out’) to FOBS (’Fear of Big Sellers’), the key technical level in S&P held and stocks were retracing (SPX -0.65%, Nasdaq -0.93%, DAX -0.28%, Nikkei -0.76%, Shanghai -1.08%). The newsflow wasn’s that supporting either: 1. Reported happily by journalist, who saw it is a defeat for Trump, the US trade deficit widened to 10-year high (to a whopping 621 billion USD – actually it will only reinforce Washington’s determination to weaken the Dollar and push down trade deals on the throat of everyone from China to the EU). 2. EU has sent its classic ’it is pessimistic of a breaktrough’, ’the UK has irrealistic expectations’ message, while the UK services industry showed its weakest quarter since 2012 and data suggested growth will drop to 0.1% in Q1. (Hey, it converged to Germany’s fourth quarter!). Needless to say, traders are busy planning what to do with the GBP if the Parliament votes ’No and No’ (No to the Brexit deal and No to the delay) and you can bet its not buying.  3. With some latency, OECD also cut its global outlook (again), globally to 3.3% from 3.5%, Germany from 1.6% to 0.7% (!). (As usual, China was spared, it will grow 6% indefinitely.) In better news, Qatar issued 12 billion USD worth of bonds amid 35 billion USD worth of orders (this tells you volumes how investors still feel in today’s rate environment), and the market speculated that at today’s meeting, the ECB won’t be in a position to not to be dovish and has to extend its cheap long term loans (TLTROs, or 700 billion euros of essentially free financing, mostly held by Italian and Spanish lenders. As discussed here at the time, Rome’s sudden cooperation last year made traders wondering if there is a deal – without these loans extended, today’s struggling Italian economy and banks will look a golden time compared to next year’s). Before the ECB meeting, currencies made minimal movements (EURUSD 1.1310, GBPUSD 1.3170, EURHUF 315.60, EURPLN 4.299), and commodities remained in their range, too (WTI 56.30, Brent 66.20 USD, Copper -0.50%).

 

  • In a typical day of the new normal, US pundits and social media users heatedly argued on whether the new Captain Marvel movie is A. horrible, male-hating feminist demonstration that kills the entire franchise B. a great movie, with suspected pro-Trump fans only attacking it for having a female lead (I let you decide this very important question), mainstream journalists were cheering that China ’only’ increased its defense budget by 7.5% to 178 billion USD in 2019 (what a relief!), India emerged as the number one buyer of Venezuelan oil – this is probably in close connection with Trump now planning to withdraw their key trade preference – and, of course, Emmanuel Macron started his ’For European renewal’ campaign in the European media, reminding of the importance of the EU project and warning Europe has never been in so much danger. (He seems not to remember there was a thing called the Soviet Union, against which NATO was formed, but nevermind.) In my strictly personal opinion, while I am all-in for a successfull and well-functioning EU, Macron has clearly  ’not learned and not forgotten’ anything: More Europe, according to him, can only come in the form of more institutions, more regulations, Internet censorship, more immigration, a new Schengen treaty (read: if you don’t behave, you are out), more centralization to avoid such ’disasters’ as jobs and wages slipping to the eastern member countries. Again, no reflection on 2015 which made anti-EU parties double their popularity and on the fact that this EU establishment has overseen Europe losing its significance in the world for 20 years, without consequences. And this complete inflexibility at a poll rating of 25% (imagine if any US President had this popularity – journalists would call to storm the White House). No wonder that – according to the Telegraph – he ’is a bigger risk to the EU than Brexit’.

 

 

Have a nice day,

Mihaly

 

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