Market update: Selling continues as strategists warn of prolonged trade war, German unemployment jumps, even criminals flee Venezuela

30 May

by Mihály Tatár

 

Good Morning!

 

  • Selling remained the favorite activity on Wednesday (SPX -0.69%, Nadaq -0.79%, DAX -1.57%, Nikkei -0.43%, Shanghai -0.99%), with the newsflow remaining one-sided and negative: 1. The Chinese media talked about Beijing shutting down rare earth exports to the US again (personally I find it very short-sighted to see this as only negative news – which superpower would want to depend on a single country for resources?) In the meantime, one of Huawei’s key customers, mighty Japanese SoftBank kicked out Huawei as well from its telecom vendors. It didn’t help the sentiment either that Bridgewater’s Ray Dalio warned that from his perspective the trade war barely started, and the conflict of the two systems (US and China) is now moving towards export controls. (I would also add that even Democrats are urging sanctions against China on its South Chine Sea activities, so a cold war is now fully underway, until Beijing folds, that is.) 2. German unemployment suddenly rose after years of declining – this is rather symbolical for now, but remember, Germany just wants to put a superhawk to lead the ECB)  3. The US bluntly told the EU that its vehicle to sustain trade with Teheran, and anyone associated with it, could be banned from the US financial system. (I am sure the bright EU foreign establishment has well-crafted plans on how to deal with this.) In the safe haven buying, the Dollar strengthened to 1.1130 against the Euro (you can bet how Brussel’s punishment proposal was received in Rome, and Salvini  announced ’I don’t govern a country on its knees’. Note the majestic ’I’, – you talk like this when you know you have 40% of the votes behind you), and yields pushed even lower (US 10Y yield 2.21%, German 10Y yeld -18 basis points).

 

  • Wednesday was a strong day even by the mainstream media’s standard: The New York Times ran an article titled ’Pregnancy Kills. Abortion Saves Lives’ (This is for real. Abortion politics is now the new hopeful theme for Democrats for the 2020 elections you know – somebody please tell these guys there is a thing called contraception); Several news sites complained that climate change goals are threatened by the fade of nuclear power – by 2040, as much as two-thirds of nuclear energy output could disappear in developed nations, which is kind of problematic given its the biggest zero-carbon power source. (I wish I could say sorry, but the very same newspapers used to incite the anti-nuclear hate mob.) In more serious news, Russia continued its expansion in Africa (signing a bilateral agreement about ’military specialists’ with Congo, there are now 20 African countries to do so, but hey, they will sure chose the EU Army as soon as its up and ready), and pressure increased on migration-hit countries to use the military to stop crime that is going through the roof – I am of course talking about Venezuela’s neighbours. (These days even the hardest criminals are leaving the place – moaning about lack of opportunities and the price of bullets.)

 

Have a nice day,

Mihály

 

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