Market update: All eyes on the Fed, European banks and China exporters keep rising, Berlin U-turns again

20 Mar

by Mihály Tatár

 

Good Morning!

 

  • Investors avoided making fresh commitments before today’s important Fed-meeting (what does the Fed think about the US slowdown? are they really ruling out a rate hike this year which markets priced in?), and negative noises from the US-China trade talks also made traders more cautious (SPX -0.01%, Nasdaq +0.12%, Nikkei +0.16%, Shanghai -0.75%, WTI slipping back to 58.80, Brent to 67.40 USD). On the positive side, DAX advanced 1.13%, led by the still rallying China-theme stocks (Volkswagen +1.6%, Daimler +3.8%, BMW +1.9%, Bayer +3.7%, let’s hope the EU has a better plan on how to negotiate with Trump than with the UK), and nothing could stop regional currencies from strengthening further (EURHUF 313, EURPLN 4.288), even as the European People’s Party was set to decide on whether to expel the Hungarian governing Fidesz party today. In the meantime, European banks kept rising (Eurozone bank index +7%, Unicredit +9%, Commerz +12%, in the last two weeks), partly on the ECB decision on keeping its cheap loan programme for another two years and partly on the excitement regarding the now official Commerzbank-Deutsche bank merger. (Note that in reality, as discussed here several years ago, this less a merger than the taking over of the ruins of the once-mighty Deutsche Bank, which was once the main target of the European Left for its role in ’casino capitalism’, and its ’cutthroat ethics’. While the media focuses on the 30,000 jobs in danger and the sudden creation of the fourth largest European bank – EU competition principles, anyone? – it should be much more interesting why two banks with 2 trillion Dollars worth of assets trade at a market value of a mere 25 billion euros, 10 years after the Financial Crisis.)

 

  • Well, so much for promises and on who takes NATO seriously: Just when Japan began its long-range missile programme to counter China, and the US announced investments in space-based laser systems, Germany suddenly backtracked and reduced its defense budget plans, well below the obligatory 2%. (Fear not, the EU announced that it is spending a staggering 500 million euros for high-tech military development.) One doesn’t need to be a genius to forecast Trump won’t be happy – he just met Brazilian President Jair Bolsonaro and promised to make Brazil a ’major NATO ally and possibly a NATO ally’, with an implicit message to the EU. In other news, Turkish President Erdogan aired the banned footage of the attack on the New Zealand mosques, describing it as a ’message and attack’ on all Muslims and specifically on Turkey, while Ukrainian President Poroshenko, after unveiling a fresh collection of anti-Russian-minority laws, promised to ’regain Crimea’, both events surely making the world a safer place in 2019.

 

 

Have a nice day,

Mihály

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