Market update: Investors wondering whether its slowdown or disaster, May losing again, Forint in focus

26 Mar

by Mihály Tatár

 

Good Morning!

 

  • After the huge beating on Friday, markets tried hard to stabilize on Monday (SPX -0.08%, Nasdaq -0.07%, DAX -0.15%, Hang Seng -0.09%, Shanghai -0.78%), with commentators visibly relieved that the German IFO business climate index and the US Chicago activity index both came in better than expeced. (Translation: The major economies could yet get away with a massive slowdown instead of a real contraction. Note that the key market theme remains the US – China trade deal, where the current status is that Washington struggles to install some kind of enforcing mechanism for intellectual rights, to which Beijing simply doesn’t know what to exactly respond. With this uncertainty, nobody can be sure when global capex investments recover.) The losers of the day were Apple (-1.2% with many investors not overly excited over the phonemaker’s ’odd’ push into digital services like video streaming, gaming and credit card services, with some suspecting that the real reason is diversification before facing the full force of Chinese competition), and the British Pound (GBP 1.3180 – with the British Parliament seizing the control from Theresa May, in theory opening up a full array of Plan Bs from a second referendum to staying in the customs union. Why does she not resign? Her Brexit performance just lost all integrity. She acts as if she would be an elementary school director.)  The winners were oil prices (WTI 59.20, Brent 67.30 USD, attributed to the Venezuela tensions and US Secretary of State Mike Pompeo warning Russia that the US won’t ’stand idly by’ as Moscow inserts military forces into the country), and regional currencies – especially the Forint which strengthened back to 316 against the Euro before today’s MNB rate decision, where analysts expect a clearly hawkish message, and possibly concrete announcements regarding monetary tools like the FX-swap policy.

 

  • In a classic situation of living in alternative realities, while Ukranian leaders talk about regaining Crimea soon with the West agreeing and using economic sanctions against Moscow, quite underreported, Russia just celebrated the fifth anniversary of the ’reunification’, with large-scale ceremonies and by finishing infrastructure projects (two new power stations and opening a 19 kilometers-long bridge connecting the Kerch Strait and Russia, the latter costing USD 4 billion and being one of the longest bridges in Europe.) It’s not just that expecting Russia to give up Crimea is pure fantasy and actually makes any peace deal impossible between the two sides – it also looks bad that Western governments still have no clue what went wrong in 2014, when they expected Russia to just do nothing and lose its strategic naval base plus its Russian-speaking community during the ’Orange revolution’.

 

 

 

Have a nice day,

Mihály

 

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