Market update: New year, new record highs in the US, Russian oil production at 30-year high

3 Jan

by Mihály Tatár


Good Morning!


  • This didn’t take long: Led by tech, energy and tax-sensitive companies, S&P (+0.42%) and Nasdaq (+1.50%) rallied to fresh record highs, also supported by a monster US manufacturing index (55 for December, showing very strong expansion). Not surprisingly, European indexes underperformed again (DAX -0.36%), held back by the strong Euro (EURUSD 1.2060 – in an interesting interview, hawkish ECB board member Coeure warned that QE may end in October and even admitted that the ECB actually sold a small amount of Dollars this year to start adding the Chinese Yuan into its reserves) and the bitter speculation on the new German government. As veteran geopolitical strategist David Goldman notes, the migrant issue has by now competely broken German politics: Imagine today’s heated arguments whether Merkel should stay or whether another election would result in another stalemate in the traditionally ’super serious Germany’ just one year ago. A vast number of voters refuse to indulge in Merkel’s great humanitarian experiment (currently, 36% of German residents under the age of five are migrant children) so even a papered-over coalition between the parties that are hostile to each other (Greens and Free Democrats, for example) would result in a weak and unstable government going forward. In the meantime, yields crawled higher (long term yields slowly, German 10Y yield 0.47%, US 10Y yield 2.46%, but mid-term yields quite dynamically, the US 5Y yield is now trading at 2.25%, for example, pulling the global bond market with it, the Serbia 2020 USD bond yield from 2.60% to 3% and the Unicredit 2021 euro bond yield from 0% to 0.25%, for example. Oil prices stayed put with the Iranian developments (WTI 60.40, Brent 66.60 USD), even with Reuters noting that Russian oil production just reached a 30-year high (11 mio barrels per day) in 2017. (One has to wonder where it would be without the OPEC-pact in place. Also, while the EU’s energy diversification project is more green than actual, to put it ironically, the new China-Russia oil pipeline just went operational on Monday, potentially doubling Chinese imports from Russia).


  • As mentioned last year, while on the surface tech companies from Apple to Facebook are doing very well, the goodwill towards them evaporated rapidly in 2017. It’s not just issues like Apple slowing its phones, Google killing off its Western competition, and Facebook taking sides in the US elections – patience is also running out rapidly on the side of tax authorities: Google, for example, has been using a Dutch company with no employees and a Bermuda shell company to avoid paying tens of billions of Dollars in taxes, eventually resulting in its famous 61 billion USD overseas cash reserve. It is highly unlikely that Trump’s Washington and Brussels would tolerate these – currently legal – tax practices going forward, even with the US tax reform being passed.


Have a nice day,



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