Market update: Stocks bounce, but verbal war heats up with capital fleeing, rough Salvini returns

15 May

by Mihály Tatár


Good Morning!


  • Stocks bounced (SPX +0.80%, Nasdaq +1.14%, DAX +0.89%, Nikkei +0.26%, Shanghai +1.35%) after the selling spree, explained with the dubious ’good news’ that the US and the Chinese President will meet and talk at the G20 meeting next month or that the Chinese data today was so weak Beijing will be forced to start a new stimulus. (7.2% rise in retail sales and industrial output 5.4% higher Y/Y – these are low numbers from China even if taken at face value.) Beijing government newspapers, in the meantime, called for ’people’s war’ against the ’arrogant and greedy US’ – this distorted perspective reminds me of radical US feminists, whose latest project was to start a ’sex strike’ to pressure men about anti-abortion legislation. This was, however, being met by a raging pushback by other feminists, pointing out that they actually enjoy sex which is not a service, shocking  the project owners. In a similar fashion, capital is leaving China with an alarming speed – Hong Kong is already nervous with 1.6 billion USD arriving from China on a single day last week, and of course it is no coincidence that Bitcoin rose 55% in May (used for smuggling out savings – note that Beijing imposed a brutal crackdown on ’underground’ foreign exchange banks, with five-year prison sentences for anybody who tries convert large amount of currencies.)  On the other hand, as veteran geopolitical strategist David Goldman observes, counter-tariffs and Boeing orders, which the media is focused on, are the least important ways China can strike back: It’s rapid progress in AI data processing chips and smartphones raises the possibility of a global semiconductor war. (Note that Huawei revenues in 1Q 2019 jumped 40%, despite all efforts by the US, which is not a good sign for US and European phone makers.)


  • In other news, Salvini – timing for the EU elections – went on the offensive and threatened again to disregard EU fiscal and debt rules ’until unemployment is halved in Italy’ (EURUSD 1.12, Italian bond yields jumped somewhat – note that while the market became bored and unresponsive to the Italian situation, as discussed here, after the EU elections, things will get serious), ING and Unicredit lined up advisers on how to take over Commerzbank (this must be very painful for ’building a national champion’ Berlin, don’t hold your breath), and more leaks emerged on what military options the White House is discussing on Iran. (This leaks are probably deliberate to put maximum pressure on Teheran – even the largest option is calling for 120.000 troops, which is barely enough for additionally securing of US military bases, meaning, if anything happens, it will be an air campaign. With this in mind, oil prices kept moving sideways at their 200 day moving average- WTI 61.45, Brent 71 USD – slightly higher after the news of the Yemeni rebel drone attacks on a Saudi pipeline.) German growth came out as +0.7% Y/Y for the first quarter (and this is now presented as a great rebound. I hope Germany does well in 2019, but look, this at -0.40% base rate and 1.12 EURUSD, the business model needs an urgent upgrade).



Have a nice day,



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