Market update: Chinese data surprise reinforces investor hopes, May defeated again

1 Apr

by Mihály Tatár

 

Good Morning!

 

  • The sentiment remained positive through Friday and investors turned even more optimistic when the Chinese manufacturing PMI came in surprisingly strong (50.8, showing expansion, after trending down in entire 2018, with analysts hoping this means a bottoming out of the slowdown in global economic activity, SPX +0.67%, Nasdaq +0.78%, DAX +0.86%, Nikkei +1.53%, Shanghai +2.31%, WTI 60.50, Brent 68.10 USD, Copper +2.8%, US 10Y yield 2.43%). (Note however, that the Japanese manufacturer index dropped the most in six years and South Korean exports plunged 8% in March Y/Y – so one has to wonder if the data is about world trade stabilization or the effect of the internal stimulus. Economists are also keen on to know how much and how fast the German data will react – remember the phrase that ’when the US sneezes, the world catches a cold’? It might turn to be true also in China – Europe relation.) The latest May Brexit defeat on Friday surprised no-one (GBP 1.3040 – Tusk called for an emergency EU summit for April 10, Merkel is to hold frantic talks with Ireland on the border issue, May plays with the idea of another general election – showing the frustration, the Deputy German Foreign Minister raged that ’the British cabinet members have no idea how workers think, live, work and behave because they were born with silver spoons in their mouths’. That might be, but neither know German politicians: As forecasted here in 2016, the EU’s insistince on punishment came back to haunt as nobody in their right mind votes for this ’deal’, where the UK suffers all the disadvantages of both being a member and leaving the bloc.) Currency traders were generally relaxed (EURUSD 1.1240 – Trump economic adviser Larry Kudlow called for an ’immediate’ 50 basis point interest rate cut by the Fed, EURHUF 321.50 – with clearly disappointed and angry analysts turning bearish on the Forint, ING, for example, forecasts EURHUF at 329, ’as investors start questioning the central bank’s credibility’, EURPLN 4.302 – weakening a bit with the market wondering if the Polish economy catches the German weakness).

 

  • While former socialism-loving Venezuelans were sitting in the dark and sometimes without drinking water, Maduro supporters were feeling emboldened with the arrival of Russian and, as it turns out, Chinese troops, reinforcing the loyal military units and the half of the Cuban secret service stationed there. (As one strategist put it, Moscow obviously wants to pull a ’Syria regime stabilization’ here, but without spending a gigantic amount of money as well, this is an uphill battle.) Turkish voters voiced their anger over the economic meltdown at the local elections and President Erdogan’s party lost in Ankara and in the coastal cities (Istambul was a draw) – in retrospect now we know why the Lira had to be stabilized even at the price at burning one-third of the reserves. In the Ukraine, former TV comedian Zelenskiy (30.4%)  and Poroshenko (17%) got into the second round – this put Zelenskiy into a good position to ally with the other defeated candidates. In the meantime, in the US, as Democrats were going through the phases to cope with the Mueller Report (shock, fear, resentment, denial, frustration, sadness, relief and acceptance), Trump went ’150% Trump’ at the Michigan rally, essentially calling for a revenge at the 2020 election.

 

 

Have a nice week,

Mihály

 

 

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