Market update: Stocks plunge as Beijing strikes back, US accuses Iran of ship attacks, Huawei expanding in the UK

14 May

by Mihály Tatár

 

Good Morning!

 

  • Trump warned China not to retaliate, as it ’will be hurt very badly’ and ’there will be nobody left in China to do business with’, but it seems the Xi team was offline at the time because the Chinese retaliation was announced almost immediately: 25% tariffs on 60 billion USD worth of goods, and for good measure, Beijing signalled that Boeing orders are now dead in the water and just to be sure, ’Chinese scholars are studying the possibility of selling US Treasury bonds’. This was a one-two punch for the markets (SPX -2.41%, Nasdaq -3.4%, DAX -1.5%, Nikkei -0.75%, Hang Seng -1.4%, Apple -5%, Boeing -5%, Deere -6%, Caterpillar -4.6%, Gold 1300 USD. EURUSD 1.1240 – the Dollar was under two-way pressure as investors were busy pricing in a US recession and a Fed rate cut, but on the other hand, the USD also remains a safe haven, especially with Washington accusing Iran with the sabotage attacks on the Saudi tankers. According to unconfirmed news, the attack was done by the Revolutionary Guards marine force, to show that not even oil pipelines circumventing the Strait of Hormuz are safe from Teheran in case of a war, with the blasts being carefully calibrated not to sink the ships. If indeed this was the case, it was a miscalculation, and National Security Adviser John ’Bomber’ Bolton won’t need too much more provocation.) In the meantime, the Turkish Lira had a rough day too (USDTRY 6.10), with the market freaking out that the government wants to transfer 6 billion USD worth of Liras from the central bank into black hole called government budget (here comes your new monetary theory), and Facebook plunged 3.6% partly the trade war but also because it emerged an Israeli hacking tools vendor can easily install spyware by simply making Whatsup calls. (Thank you for protecting our privacy so strongly, Mark.)

 

  • While governments in the West were busy with the climate apocalypse and Ireland was the latest to declare Climate Emergency (after the UN warning of one million dying species and the media talking about the Earth losing its free-flowing rivers within two weeks – I am not sure turning environmental protection, which is important enough in itself, into a crazy Death Cult, is good for the cause), Huawei announced it will build a 400-person chip design factory in Cambridge. (It will compete with ARM Holdings, the chip design firm sold in 2016 to Japan’s mighty Softbank. Softbank is a major shareholder in China’s e-commerce giant Alibaba, the other spearhead of the Silk Road. If you were wondering how long does it take for China to reach chip independency, wonder no more. Also, it explains why the UK was so quick and aggressive in rejecting the US demand to eject Huawei and why conservative Brexiters are not so anxious about leaving the EU. They might be later part of a larger common market.)

 

Have a nice day,

Mihaly

 

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