Market update: S&P at fresh record high, Democrats take on Trump with firefighters and 5 trillion USD spending on climate

30 Apr

by Mihály Tatár

 

Good Morning!

 

  • Stock markets edged higher on Monday (SPX +0.11%, a fresh record high, Nasdaq +0.19%, DAX +0.10%, Shanghai +0.19%), with investors being satisfied that an indicator showed limited core inflation in the US (1.6% – the Fed can easily remain dovish), that the Chinese manufacturing was weak enough to warrant government stimulus but otherwise hinted no disaster (PMI 50.1), and finally, US Treasury Secretary Mnuchin reassured the public that trade enforcement mechanisms with Beijing are ’close to done’. The loser of the day was Alphabet (the stock plunged 7% as Google’s advertising revenue fell short of expectations, namely rose ’only 15%, the slowest since 2015’ – as discussed here earlier, Google was priced in for eternal and rapid expansion outshining China’s Big Leap Forward). Somewhat ironically, while the GBP – dubbed the ’Great British Peso’ these days – waited at 1.2950 for the next Brexit twist, the objective-as-the- media Bank of England came under fire for getting all its forecasts wrong. (And I mean, all wrong. Before the referendum, the central bank threatened with a recession of 8%, the GBP dropping below parity with the Dollar and property prices plunging almost a third. In fact, growth was near 2% in 2017 and 1.4% in 2018. It’s not not say the Brexit melodrama was good for the economy – it certainly wasn’t, and shaved off about 1% from GDP each year through investment uncertainty. But one expected a somewhat more adult behavior from the Bank of England and this tasteless intervention eroded its credibility.)  Oil prices bounced from their earlier plunge (WTI 63.40, Brent 71.80 USD), with analysts and traders frantically trying to find out if Trump’s tweet about more OPEC output was actually a fact or a wish (especially given that the majority of analysts is extremely bullish, pointing out the heavy fighting in Libya will eventually hit the oil infrastructure and that the Iran sanction waivers expire on May 2, further limiting supply. Note that if oil prices stay near 70 USD, they will feed into inflation, eating away US consumer spending and forcing the Fed towards rate hikes – something Trump doesn’t want before 2020).

 

  • In the US, Democrats intensified their brand-building efforts (Joe Biden proudly announced he won support of the International Association of Fire Fighters, – I am not kidding, this is a big union -, and that he raised 6 million USD on his first day – as mentioned earlier, he is indeed more popular among blue-collar workers than Hillary Clinton ever was even when her husband was smiling at her side at rallies. The problem is that he is seen as a dynosaur by his own party. Beto O’Rourke moved in to claim the mantle of the climate champion by proposing a 5 trillion USD programme to reach a net-zero carbon emmission in the US by 2050 – sounds tough, doesn’t it, you tell me if voters care more about 2050 or about Trump’s proposal to do something about the rottening-away Kennedy airport and rebuild infrastructure), while the rest of the world was watching Beijing’s efforts to re-popularise the New Silk Road. (Despite the BRI now being supported by more than 126 states from Italy to Singapure, making it a killing competition for the boring G20, Beijing now clearly feels the fear and anxiety of small countries who are afraid to get too dependent from China. President Xi made maximum effort to drive home that Beijing is ready to re-negotiate virtually everything from Malaysian bank costs to loans for the Thailand high-speed rail, not to mention helping emerging countries getting onboard of the Digital Silk Road. The appeal of the latter is enormous – even the UK seems to be resisting the US pressure to keep away Huawei, which has even outspent Apple in Research and Development last year.)

 

 

Have a nice day,

Mihály

 

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