Market update: US tariffs go live, analysts freak out, EU rejects Iranian ultimatum, Hungarian inflation almost 4%

10 May

by Mihály Tatár


Good Morning!


  • Trading remained dominated by the US – China news as after some last-minute noises, the 25% tariff punishment on Chinese goods came into effect (SPX -0.30%, Nasdaq -0.41%, DAX -1.69%, Nikkei -0.69%, Shanghai +1.98%). To put the moves into perspective, from it’s record high the S&P dropped 2.7% in one week, from one-year high the DAX dropped 4% and Shanghai erased 12% from its spectacular 34% 2019 rally – as said the certainty that ‘the deal is almost behind us’ is over. (Somewhat funnily, in the changed sentiment even overhyped cannabis stocks and investments related to them—like companies manufacturing CBD products and custom rolling paper— are dropping like flies. Note that the majority of analysts refuse to accept what is going on intellectually – the first clash of two superpowers and the end of the free trade paradigm – , and talk about ’world leaders acting like kids’. Others, like Moody’s, warn that the tariffs and counter-tariffs will push the US into recession by 2020 – to which one could say, they better do, because otherwise now fashionable economists and their worldview will be discredited even more than by the ’British economy will collapse after the referendum’ and ’stocks will crash after Trump is elected’ debacle. The US trade deficit to China, by the way, just became the narrowest in three years, with the tariff bombardment barely having started – Trump is already talking about extending the 25% tariff to another 325 billion USD worth of goods if Beijing doesn’t return to its earlier deal concessions. Beijing does seem to be taken aback by Trump’s retaliation – according to the US President, President Xi wrote him ’a beatiful letter’, hence the bounce in Chinese stocks. )  Otherwise, trading remained slow and careful (EURUSD 1.1230; WTI 61.80, Brent 70.50 – both still testing their 200-day moving average; EURHUF 324.20 – Hungarian CPI for April showed an inflation of 3.9% Y/Y, getting closer and closer to 4%,  – this trading topic will return soon, but industrial production increased by 8% Y/Y in March, making fun of the old school predictions that the German industrial slowdown will automatically and immediately destroy Hungarian manufacturing – clearly the web of economic activity in the region is much more complex than we were led to believe; EURPLN 4.30.)


  • While China made rapid progress in the building of its third aircraft carrier and next-generation nuclear submarines, the US tested its unmanned combat boats equipped with 50-caliber machine guns and Hellfire missiles, and Sweden targeted lesbian feminists and veiled Muslim women in its new recruitment video campaign for joining the military – Russia must be very afraid now – ; even the EU became frustrated with Iran and rejected Teheran’s 60-day ultimatum to protect it from US sanctions or see more uranium enrichment. (This U-turn had to be a painful, as just last week Mongherini was busy criticizing Trump and reassuring Iran.) Note that redirected by the US sanctions, India stepped up its purchases of US oil and became its second-largest buyer (13 million barrels in March only!), pushing behind China and South Korea.




Have a nice day,



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