Market update: Economic data horror show sends traders selling, Mueller report announced

25 Mar

by Mihály Tatár

 

Good Morning!

 

  • Well this didn’t last long: Just two days after the friendly and supportive Fed, investors were suddenly hit by a horror show of bad data on Friday: Germany posted a shocking 44.7 for Manufacturing PMI (under 50, the index shows contraction, meaning, Germany is falling towards deep recession), the entire Eurozone manufacturing plunged to 47.6 and even the US showed a marked slowdown (52.5). Traders felt fooled by the all-more-dovish-than-expected-in- March central banks (what is that they know but traders don’t?), and were selling risk assets aggressively (SPX -1.90% to 2800 points, right below the key level again, Nasdaq -2.50%, DAX -1.61%, Nikkei -3.01%, Shanghai -1.37%, WTI 58.30, Brent 66.40, Copper -8%, EURUSD 1.13, EURHUF 317, EURPLN 4.30). In a classic recession and rate cut pricing, yields continued to fall (US 10Y yield 2.43% – wiping out their entire 2018 rise, the German 10Y yield is negative again, the Australian 10Y yield dropped to an all-time low, that  is something), and only Gold could rally (1315 USD). Note that the usually quite loud mainstream economists are still totally silent on what exactly is going on in the ’European powerhouse’ Germany economy. (Diesel! Global slowdown! Diesel! Let’s hope its not the case that it just became a satellite derivative economy of China, because then tough years are ahead.)  Also, after this miserable set of European data, a large-scale fiscal stimulus will be necessary out of sheer political survival, whatever Berlin has been preaching about fiscal discipline since 2009. (Yes, strong expansions are followed by strong corrections. But at an interest rate of -0.40% and EURUSD at 1.13, is this the best that the Eurozone membership can offer? This is quite humiliating really, in the same way when British Chancellor Philip Hammond defends his prime minister in live tv by saying that ’removing May wouldn’t help’, as yesterday. Wonderful.)

 

  • Now we know why even the most vocal Democrats were quietly leaving the Trump-impeachment ship making hilarous arguments like ’the process would divide nation’: They knew. They knew that, according to Special Investigator Robert Mueller and his two-year investigation, there was no collusion between Russia and the Trump campaign, as announced during the weekend. Auch. Regular readers are probably not that surprised, but this must be very painful for millions and millions of people who were misled and manipulated into a revolution-like sentiment by news channels and journalists. In practical terms: 1. This is a huge political win for Trump, who already had good chances to win in 2020 with its opponents moving towards the ’raise the taxes’ Left. While I am sure the media focus will now turn towards other Trump misdeeds, Democrat nominees just suffered a blow to their integrity even if they did nothing wrong. Only a massive recession by 2020 can help their case. 2. Most European governments, banking on an impeachment or easy Trump defeat in 2020, will now have to face a much stronger Trump. On the other hand, this is good news for Russia which will now start the work to get the sanctions removed.

 

 

Have a nice week,

Mihaly

 

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