Market update: GDP data and US patience on trade improves sentiment, EU regulation machine hits carmakers

29 Mar

by Mihály Tatár

 

Good Morning!

 

  • US growth slowed down to 2.2% in Q4 according to the published data, but this was actually a relief for the super-pessimistic market (personal consumption expanded by 2.5%, and the full-year growth, helped by those hated Trump tax cuts, was 3% – many countries would kill for this these days). The news that that the US-China trade talks are going well again, and that the US is prepared to extend the time for talks ’by weeks or months’ as they are ’not time dependent but policy and enforcement dependent’ improved the sentiment even further (SPX +0.36% – back to the key 2810 zone -, Nasdaq +0.34%, DAX +0.08%, Nikkei +0.73%, Shanghai +3.39%). With this background, oil prices shrugged off the US President’s second tweet intervention (’world markets fragile, price of oil getting too high!’ – but there was no ’or else’, for now, WTI 59.60, Brent 68.10 USD), the Dollar strengthened (EURUSD 1.1220, Gold plunged to 1288 USD). Still sold off were the British Pound (GBPUSD 1.3040 – if the third Brexit deal vote fails today, it’s either hard Brexit or its delayed – as traders call it, ’cancelled’ Brexit), and the Turkish Lira (TRY 5.61 – according to the Financial Times Turkey burned at least a third, or 10 billion USD of its foreign reserves this month (!). The Forint remained weak after the giant squeeze (EURHUF 320.50), which prompted the MNB to make further comments (’market was pricing more hikes than justified’ -as discussed here earlier this year, ’difficult to see Hungarian policy diverging from ECB’ – also not a shocker, ’CPI outlook not clear, further monetary policy hinges on CPI’ – well, we do know its not trending lower for sure. Note that central banks hate, hate overpositioning in their currencies, especially if it hinders their free hand in monetary policy. Now that’s cleared out.)

 

  • While Washington announced it wants astronauts to step on the Moon by 2024 as part of its space ambitions – this would a first since 1972 -, Brussels was busy, too: It passed a resolution calling for reparations for crimes against Africa during colonialism (I wonder how much taxpayer money of not very slave keeper Finns or Eastern Europeans will go into this ideological exercise), and even better, unveiled its plans to force carmakers to install automatic speed limit automatics into passanger cars, among others. (As strategists point out, if you thought Emir, Mifid II, GDPR and the Internet copyright laws were crazy, you have seen nothing yet: While in theory this should protect people from dying in car accidents, it essentially means driving at the mercy of your speed limit sensors and the intelligence of your GDP and map database. Just imagine your car suddenly starts slowing because a speed limit sign or a data point was placed at the wrong place. But this is just the technicals. The law package will distort the European automaker world completely – the age when engine performance was driving technology development and pricing would be over, and one can only hope non-European buyers will appreciate the new ’compliant’ models. (The worldview behind this idea is probably to force everyone into electric cars and eventually dumb down traffic to the point that self-driving softwares have a chance – but these regulations never think of second-iteration and third-iteration effects and the complexity of real driving. Luxury and sport car company investors are probably not amused, by the way.)

 

 

Have a nice day,

Mihály

 

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