Market update: Traders watch as first vote goes no in the UK, US inflation soft, EU aircraft carrier to be built

13 Mar

by Mihály Tatár

 

Good Morning!

 

  • Investors cautiously watched the Brexit drama (SPX +0.30%, Nasdaq +0.44%, DAX -0.17%, Nikkei -1.04%, Shanghai -0.20%, Gold +1% to 1305 USD), and as Boeing MAX planes were grounded from the EU to India (Boeing -6%, or -11% in 48 hours). As forecasted here two years ago, the EU’s insistence to make an example of leaving Britain will come back to haunt, and the ’New Iron Lady’ – if anyone remembers the media excitement back then – received another crushing defeat by 391 to 242 on her ’improved Brexit deal’.  The UK, which used to run half of the world, is now scheduled to vote today on hard Brexit and tomorrow on whether to delay Brexit (GBPUSD 1.3060) – 16 days are left – , with the EU already communicating that it can do ’nothing more to help’ and Labour- leader Jeremy Corbyn calling for, what else, general elections. (By now, even the German media is visibly in near-panic – why are British lawmakers giving lip service to the referendum result but sabotaging the process? Well, I suppose they originally thought Britain’s position was stronger than this bill that looks more like a defeat-in-war punishment, and never thought May was capable of alienating potential ally Donald Trump in the first minute of the negotations. Note that if it will be hard Brexit, the economic warfare – unilateral tariff and tax actions  – will start immediately.) In the meantime, the US inflation data underwhelmed (February Y/Y 1.5%, core inflation 2.1%), confirming that the Fed has the luxury to wait with rate hikes, and that there aren’t too many growth tensions at the moment, EURUSD 1.13, US 10Y yield down to 2.61%, USDHUF 279, USDPLN 3.81, USDCZK 22.73.)

 

  • That was quick: Germany rejected the demand from Washington to ban Huawei’s 5G in Germany, and instead, Merkel announced that Berlin will create ’it’s own security standards’, coupled with a ’no- spying agreement’ with China. (Yes, you heard that right. All that dirty intelligence gathering has to stop immediately from January 1 2020, I suppose. All those Chinese intelligence specialists – stealing German technology or listening to Uygurs living in Germany –  have to be very worried for their jobs now.)  This, and the latest failure of the European effort to unitedly tax large tech companies for digital advertisments, gave a special flavor to Merkel’s other announcement, that she supports building an EU aircraft carrier. (Again, the idea is great. As with the EU army, the problem is that this is only a Merkel-style communication bomb. If there is no real stomach for an EU army, who will spend a decade and the brutal resources needed to build a carrier? By the way, will it communicate via Chinese 5G or via American-controlled satellites?)

 

 

Have a nice day,

Mihály

P.S. Dear Readers, the next Market update will be published on the 18th of March.

 

If you liked the post, follow Barrelperday on Facebook!

Or subscribe to our Twitter feed or Newsletter

No comments yet

Leave a Reply