Market update: Stock markets rally, world trade keeps shrinking, Italy’s push for Chinese investments worries both the EU and the US

18 Mar

by Mihály Tatár

 

Good Morning!

 

  • With both the ECB and Fed being dovish, and the US trade talks seemingly going well, investors happily kept buying, sending the S&P to test the key levels for another time (SPX +0.50% or 2822 points, Nasdaq +0.76%, DAX +0.85%, Nikkei +0.62%, Shanghai +1.92%). The latest bad signs on world trade, namely that Japanese exports dropped 1.2% Y/Y in February (the third negative month in a row and towards China, the drop was -6.3% Y/Y), were ignored, and so was the latest new low in UK politics – Theresa May threatening ’to give up trying to get Brexit done’ unless her deal gets finally supported. (GBPUSD 1.33, as by now, Bloomberg openly calls for another referendum, warning that history’s verdict would be brutal on May’s ’toxic triumph’.) Otherwise, currency markets remained slow with the Dollar gradually weakening somewhat ever since the US non-inflation data (EURUSD 1.1340, USDHUF 277.30, EURHUF 314.40, USDPLN 3.79, EURPLN 4.297, USDCZK 22.61, EURCZK 25.64), while the oil rally pausing on Russia contradicting Saudi Arabia’s urge to cut production (’currently, the price is acceptable to all the parties, both to consumers and producers.’, WTI 58.40, Brent 67.20 USD). (Note that the market is full of speculation about Venezuela – traders send each other the latest news headlines on whether the US will intervene. However, apart from US diplomats being evacuated and CIA assets deployed in and over the country, there isn’t much movement on the ground, and there is little appetite in anyone to send in 100,000-150,000 troops into a ruined country and then rebuild it. It is true however, that the US intensively tries to send the message to the military and the opposition that a takeover would be supported.)

 

  • Veteran geopolitical strategist David Goldman argues that the Boeing scandal – stucking big modern engines on an 1950s airframe design, making an essentially unstable airplane and using a software to quick-fix the inherent problem – couldn’t have happened at a worst moment: China’s aircraft manufacturer COMAC has nearly 1,000 orders for its C919 passenger jet, designed to compete globally with Boeing and Airbus planes. It’s not just that the prestige of the US industry and its air safety standards have been tarnished: the US is at the moment losing badly in global high-tech competition from 5G to mobile phones and aircrafts. Not unrelated, in a rare moment when suddenly Trump and the EU found themselves on the same side, Italy’s Five Star announced Rome is to become the first G7 country to join President Xi’s Belt and Road Initiative on March 22, coupled with a deal spree from custom agreements to engineering cooperation and China-financed infrastructure projects. (Just when the EU called China ’a strategic rival’ for the first time ever – even Merkel, who overlooked the destruction of Germany’s once dominant solar industry by Chinese firms copying its technology, is uncomfortable with the attempts of purchasing German high-tech firms and the push to replace German cars within China by home-made vehicles.)

 

 

Have a nice week,

Mihály

 

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