Market update: Trade tensions escalate, Saudi Aramco shatters records, Forint weakens as inflation goes wild

10 Apr

by Mihály Tatár

 

Good Morning!

 

  • Investors didn’t take well the escalating US-EU trade war (EU officials called the tariff threat ’totally unjustified’ and said preparations were underway to hit back – showing how little he understood the situation, French Finance Minister Le Maire announced that ’when I see slowing world growth, I don’t think that we can afford a trade war’). This referred to the IMF, which yesterday cut its global growth outlook the third time in a row and to the lowest level since the Financial Crisis (to 3.4% for 2019 from the original 4%, US 2.3%, Eurozone 1.3%, Germany 0.8%, Italy 0.1%, Slovakia 3.4%, Czech Rep. 2.9%, Poland 3.8%, Hungary 3.6%, Romania 3.1%, Serbia 3.5%, Croatia 2.6%). Traders, also wary of today’s event risks (ECB meeting – what can they do they haven’t tried yet?, FOMC minutes – is the Fed really that hawkish?, US CPI data), started taking profits (SPX -0.61%, Nasdaq -0.56%, DAX -0.94%, Nikkei -0.62%, Shanghai -0.35%, WTI 64.10, Brent 70.70 USD), and movements in the Euro and the GBP stopped dead (EURUSD 1.1260, GBPUSD 1.3070). (The EU is still rejecting May’s request for a brief postponement, and wants to force a long extension – this is understandable given that a short extension will only result in more and more extensions and summits, but note this absurd situation is also their making given the Brexit deal conditions are worse than a peace treaty after a war lost. Still playing the bad cop, Paris demanded that the UK has its decision-making powers curtailed and that regular checks ensure that Britain ’is sticking to its commitmens in sincerere cooperation’ – I guess this means they still want the money flowing in and that the UK doesn’t get better on with Trump and trade than they do. Nice. One has to wonder if this goes down well with British voters if there is another referendum).  In other news, the ’isolated,  the power of the crown prince is collapsing by the minute’ Saudis pulled in an unprecedented 100 billion USD of orders when issuing their 12 billion USD worth of bonds for Saudi Aramco (allowing the yield being lower than that of the sovereign, a rare sight. Also, this episode tells you volumes about how much idle money is still looking for meaningful investments around the globe); Trump is to sign an executive order to accelerate cross-border energy infrastructure projects (offering relief to Permian basin oil producers who literally pay pipeline operators to take their natural gas); and the Forint weakened further (EURHUF 322.30), after the Hungarian inflation jumped to 3.7% Y/Y (core inflation 3.8% (!), the highest since 2012 – this is getting ugly and with oil prices so high and cheap labour having disappeared completely the pressure on the MNB will only increase, as discussed before.)

 

  • While the CIA and Beijing battled for quantum technology supremacy, and cybersecurity experts were taken aback by the level of technology used by the Chinese spy lady caught at Trump’s Mar-a-Lago club, the EU was at odds how deal with Brexit and the showdown in Libya, moving-to-the-right Israeli PM Netanyahu pulled a surprise victory at the elections. (Surprise, that is, if you believed a single word the mainstream media and the pollsters have been saying in the last couple of years, about the ’fighting for survival Prime Minister’, in my personal opinion.  The reason of this surprise is the same as with the Brexit referendum or the Trump victory: If existential fears take over the electorate, character assassinations by journalists become meaningless. That’s why corruption allegations against Netanyahu, sex scandals about Trump, or calling Brexit voters crazy countryside racists had little effect. On the contrary, it made a lot of voters go hiding from pollsters, distorting forecasts.) Except an even tougher US-Saudi-Israeli Middle East policy going forward.

 

 

Dear Readers, there will be a temporary pause in Market updates as I leave for Fathers’ Holiday. Wishing you all the best until then,

Mihály

 

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