Market update: Oversold stocks finally bounce on Powell, carmakers rise, Joe Biden goes all-in

5 Jun

by Mihály Tatár

 

Good Morning!

 

  • Well, Fed Chair Powell was certainly not hostile to the idea of rate cuts (’closely monitoring the situation’, ’we will act as appropriate’) and the Mexican government was optimistic it can reach a deal with the US (’80% chance of avoiding tariffs’), which was more than enough for oversold stocks to finally bounce (SPX +2.14%, Nadaq +2.65%, DAX +1.51%, Nikkei +1.81%, Shanghai +0.59%). Naturally, US bonds and the Dollar were less happy, US 10Y yield 2.13%, EURUSD 1.1260, just as the weak Chinese services data and an upside surprise in US inventories made oil prices skip the move for now, WTI 53.10, Brent 61.70 USD). The winner of the day were the Mexican Peso (+1.6%) and auto shares (MSCI Auto index +3% – carmakers would be worst hit by tariffs on Mexico, which sells about 40 billion USD of auto parts to the US), but the regional currency rally also continued led by the Forint (EURCZK 25.695, EURPLN 4.2772, EURHUF 321.90), with investors deciding that with the German slowdown and a Eurozone inflation of 1.2% Y/Y as announced yesterday, World Peace will arrive sooner than the first ECB rate hike. Even Italian stocks had a strong day (MIB +1.79%, Unicredit +2.6%), with Italian Prime Minister Conte announcing that EU budget rules ’remain in force until we manage to change them’. (It seems the first setup will be that Conte is playing the good cop and Salvini is demanding the perks and concessions from the EU. Note that since Salvini’s brutal victory at the EU elections, nobody in the media and in Brussels seems to be so eager to see the coalition collapse anymore.)

 

  • As Venezuela defaulted on another gold swap agreement (this time being unable to repay a mere 570 million USD and thus giving Deutsche Bank a nice 20 tonnes of gold collateral) and the South African economy declined 3.2% (you know that anti-white socialism must work out very well when you hear analyst saying that ’the only good thing about such a large contraction is that it creates a large base effect, which helps the economy to bounce’, hilarious), and Mexico called for legalizing all drugs (and they call Trump unpredictable and dangerous);  Joe Biden went all-in to put the other Democrat presidential contenders out of business: He promised a federal LGBTQ ‘Equality Act’ to make alternative sexuality groups more powerful and ensuring ‘basic rights’  (translation: You refuse to perform a mutilating transgender surgery on a teenager? No medical license for you!  You refuse to teach kindergartners that they can choose their own gender? Good luck keeping your teaching certificate) and announced a sweeping climate plan that aims for ‘net-zero’ emissions by 2050. (This includes a set price for carbon, reversing Trump’s tax cuts to fund research and spending on low-carbon energy and even tariffs for countries who do not comply with CO2 targets. Auch, the latter won’t help his reconciliation with China.)

 

 

Have a nice day,

Mihály

 

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