Market update: Selling becomes more measured as deal remains main scenario, oil prices bounce

7 May

by Mihály Tatár


Good Morning!


  • The selling became more measured with the news that the Chinese delegation was still headed for Washington, and as it was confirmed that the reason for Trump’s anger and the tariff threat was indeed a last minute classic backtracking from Beijing, and not a crazy and unacceptable US demand some newspapers reflexively assumed (SPX -0.45%, Nasdaq -0.50%, DAX -1.01%, Nikkei -1.50%, Shanghai -0.18%, Apple -1.5%, Caterpillar -1.7%, Deere -4%). Note that the market’s working assumption is still that China is interested in giving Trump a semi-victory in return of basically being able to do what it has always done, maybe with some concessions to technology rights (it doesn’t really need to steal it anymore anyway), opening up some non-strategic markets (imagine Wells Fargo competing with ICBC in rural China, ha), and above all, buying commodities from the US (soybeans for Huawei phones’, that can be really agreed to) . What the market is afraid of seeing is Beijing reading too much New York Times and making the decision to play for time and sit out 2020, which would force Trump to go nuclear on Chinese imports. Oil prices bounced (WTI 62.40, Brent 71.30 USD), which was connected to the rising US-Iran tensions, but note prices touched the key levels (200 day moving average) yesterday, prompting many sellers to take profits. Otherwise, currency traders had limited appetite to trade the latest US – China power play (EURUSD 1.1210, GBPUSD 1.31 – Theresa May makes another effort to make a pact with Labour today – Tory voters must be happy -, EURHUF 323.70, EURPLN 4.2825), with the Turkish Lira weakening past 6.12 against the Dollar after President Erdogan ordered a re-run of the Istanbul elections, where the AK Party was narrowly defeated. (It’s a not a small feat that the Turkish Lira can weaken given it is almost prohibited. Remember during the 2018 near-collapse, the 7.00 per Dollar level was said to be the point of no return for the Turkish financial system).


  • While Joe Biden has jumped to the top of the Democrat field with a striking 56% of Democrats seeing him the most fit to beat Trump (this compares with 12% for socialist Bernie Sanders and 3% for about-indian Elizabeth Warren, it seems that the ’groper’ character assassination attempt failed), you know that the excitement is limited when tickets to see the Clintons live drop to less than 10 Dollars and the CNN has to fire 300 staff before an election year. As discussed here earlier, the post-2016 Democrat party went so much to the hard left (Warren’s wealth tax seems like a mild idea in this brutal field), that Joe Biden, who didn’t find it necessary to have a programme apart from hating Trump, feels electable. (A familiar face from the good old’ Obama years. Nevermind that hating Trump is not argument, as Hillary had to find out the hard way).



Have a nice day,



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