Market update: Strong US growth frustrates analysts, S&P at record high, oil prices slammed lower

29 Apr

by Mihály Tatár

 

Good Morning!

 

  • Disappointing pessimistic analysts, the US economy grew much stronger in the first quarter than anticipated (3.2% Q/Q instead of 2.3%, this is of course no surprise for regular readers), and worst of all, much of the outperformance came from increasing net exports (with an unusually large, +1% contribution, while global trade volumes are falling – hey, this is a tricky way ’to shoot yourself in the foot’ – as the journalist mantra goes –  in a trade war!). Stock markets were approving (SPX +0.47% – this is a record high ladies and gentlemen, Nasdaq +0.34%, DAX +0.27%, Shanghai +0.78%, with the main driver still being the dovish Fed and the China – US trade talks, with the promise that the deal will be done in the coming days. One really has to wonder what will happen if the deal is done, and its not that cool when reading the details?) Currency traders were taking some profit in the EURUSD (1.1160, after sending the pair down from 1.13 to 1.11 on the US – Germany economic divergence theme. Regional currencies remained disliked, EURHUF 322.40, EURPLN 4.307, EURCZK 25.71). The Euro also was helped as the Spanish election turned out to be a non-event (charismatic Socialist Prime Minister Pedro Sanchez collected 123 seats – with the nationalistic anti-immigration Vox Partyentering the parliament for the first time with 24 seats, giving the usual commentators a positive feel for the EU elections.) In commodities, just when the ’What oil at 100 USD will mean for the economy’ articles mushroomed again, oil prices were slammed lower (WTI -6% to 62.80 USD, Brent -5% to 71.60 USD), with the over-positioned long market being hit by Trump (’Spoke to Saudi Arabia and others about increasing flow. All are in agreement.’). In the meantime, Commerzbank (+3.6%) rose and Deutsche Bank dropped (-3.5%) after the merger talks collapsed – this tells you a lot about who is thought as being healthy here – but don’t worry a resounding Plan B will be quickly found as a failure here would completely destroy Finance Minister Olaf Scholz’s political capital, who was the biggest advocate for the merger. (And no, ING or Unicredit acquiring Commerz wouldn’t solve the political issue, which is centered around Deutsche Bank, not to mention it would make Scholz’s project, to create a new German champion, hilarious).

 

  • While the New York Times got into trouble for portraying Israeli PM Netanyahu as a dog who is pulling a blind Trump (imagine the uproar if this cartoon had been done by any other newspaper, and not by the champion of political correctness), the infighting between the 9 Democrat contenders in the US heated up drastically with Joe Biden officially joining the race. The frustration is clearly visible: It’s not just that it’s hard to differentiate yourself in this to-the-hard-left field, altough the brandbuilding has begun (Sen. Kamala Harris ’the prosecutor’, Sen. Elizabeth Warren ’the big structural changer’, Rep. Tim Ryan ’the uniter’, Julian Castro ’the Latino anti-Trump’), it’s also that those ungrateful voters don’t seem to be caring about race and gender so much as the Democratic Party (77% according to a latest poll), and so far still prefer old, white and male Joe Biden and Bernie Sanders, freaking out the progressives. (Typically, it’s the voters’ fault, not the argument’s). While the infighting goes on, Trump managed to manouver the existing Democratic opposition to another sweet spot (just as with the Wall): The US President, rightly or wrongly, pushes again for the 2 trillion USD infrastucture budget, which is vehemently opposed by Democrat leaders unless there is a tax raise and more climate change related spending in exchange. (Good luck’).

 

 

Have a nice week,

Mihály
 

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