Market update: Trade comments help sentiment as German factory orders plunge, Venezuela and Libya situation gets serious

5 Apr

by Mihály Tatár

 

Good Morning!

 

  • The positive noises coming out of the trade talks (’very monumental’ deal to come within weeks, as per Trump, ’reached new consensus on such important issues as the text’, said Vice Premier Liu) kept the party going on Thursday (SPX +0.21%, DAX +0.28%, Nikkei +0.29%, US 10Y yield 2.53%, WTI 62, Brent 69.20 USD). (Note that while the media can only talk about this trade conflict in relation to this year’s economic growth and the 2020 election, the Chinese perspective is very different: Given that China will be the largest and most powerful economy by 2035, and far too big to intimidate, why pick a fight with the US now?). While hedge funds eagerly waited for the trade deal text details (’is it buy the rumour sell the news?’), the other newsflow was less rosy: German factory orders plunged 8.4% Y/Y (!) in February, the most in a decade. (It’s no wonder the ECB plans to pay banks for lending, but we are now 10 years after the Financial Crisis. While nobody is really talking about it, there is something wrong with the Eurozone economic model. What will happen if there will be even US tariffs on the EU? If you thought negative interest rates are only ’odd’, you haven’t seen the news that Western Europe’s tallest skyscraper will be built in a 7.000-residents Denmark town.) The Brexit-drama reached a fresh new low, with the talk centering on a ’confirmatory referendum’ on the Brexit deal and on whether a customs union is even viable without permanent Brexit-style negotations (GBP 1.3070, a visibly depressed Merkel announced that ’we have to be able to do it’ – namely the orderly Brexit, and probably influenced by lazy advisers, still talked as if Irish border remained the key question here. In fact, Chancellor Hammond is proposing a second Brexit referendum and currently May is desperately trying to reach a compromise with Labour without making the Tory party collapse, and avoiding taking part at the EU elections. The latter would be a surreal exercise which won’t go down well in history books – just imagine if somebody tried to force Margaret Thatcher to organize it while leaving.)

 

  • While socialist utopia Venezuela’s health system collapsed and its population anxiously waited for the regular after-dark violence that makes US post-apocalyptic movies look peaceful (but US feminists still focus on whether Joe Biden hugging you is sexual violence or not), Russian and Chinese military reinforcements arrived in a steady pace, raising the stakes and creating a huge dilemma for Washington. (It can back down and get humiliated, or, as in Syria, the CIA can begin arming up resistance groups, but that means starting an actual civil war.) Speaking of civil wars, hostilities became open in Libya, where warlord Khalifa Haftar ordered his forces to advance towards Tripoli. (Altough it was not clear he wanted to take the country, or just strengthen his position before the April 14 peace conference, or both. Haftar used to be a top military officer of Gaddafi, and is supported by Moscow, as he is the least Islamists of the current warlords. Great job, Obama.)

 

Have a nice day,

Mihaly

 

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