Market update: Investors pray for a dovish Fed, weak numbers from Ifo to FedEx, oil plunges

by Mihály Tatár

Good Morning!

• Stock markets performed the weakest bounce humanly possible before tonight’s critical Fed interest rate decision (SPX +0.01%, Nasdaq +0.45%, DAX -0.29%, MIB -0.26%, Warsaw +0.92%, Nikkei -0.75%, Shanghai -0.75%), with investors praying for a ’dovish rate hike’ (a final, fourth rate hike for 2018, pushing the upper benchmark rate to 2.50%, but at the same time promising a super dovish attitude for 2019) or a ’surprise no rate hike’ instead of an ’everything going as planned rate hike’ (meaning, more hikes are to come next year). The newsflow remained pretty bad, with FedEx – a global growth indicator like Copper – slashing its 2019 forecasts on global trade and European slowdown concerns (resulting in a 5% plunge in its share price), the German Ifo business climate index fell sharply, and Japan’s export growth slowed down to zero (!), mostly on China’s weakening demand. Even Trump intervened again, and warned the Fed to ’not to make a mistake again’ and ’read the Wall Street Journal’ – which called for pausing in rate hikes -, adding that ’feel the market, don’t just go by meaningless numbers!’. (Auch, that hit hard).

• The non-stop collapse in oil prices also unnerved the market (WTI 46.50, Brent 56.70 USD – we are now 35% lower than the October high – remember, that was when analysts told us prices will soon hit 100 USD), and its hard to imagine what would need to happen for hedge funds to turn really bullish again. (Saudi Arabia political risks exploding? A full Trump-Xi deal? A gigantic Chinese stimulus package? All these with a Fed dovish policy turn?). Regarding the latter, the Dollar did start to weaken yesterday (EURUSD 1.1390, USDHUF 283, USDPLN 3.76), with many traders, as expected, deeming the strong Dollar policy unsustainable.

• In other, ’new normal’ news, the Belgian Prime Minister Charles Michel resigned as his government collapsed on the UN-migration pact scandal (when do these guys finally realize they are accountable to their voters, who don’t want to turn Europe into an immigration island?), Macron’s popularity dropped further and even the French police threatened to side with the protesters (remember when Belgium and France used to be the ’coalition of the willing’ on immigration? – note that the mainstream media still focuses on the French being too lazy for Macron’s reforms, and completely ignores the possibility that the majority now completely refuses Macron’s worldview from climate change to competing with Asia with even lower real wages and generally the idea of demographic ’refreshment’). Speaking of climate change, the Left’s rising star in the US, Alexandria Ocasio-Cortez announced her ’Green New Deal’  – an all-out economic campaign against climate change before ’people are going to die’, including a forceful shift in company regulations to use 100% renewable energy sources by 2030, and creating 20 million jobs in the process. (I don’t want to go into world view questions and the realities of technology now, just note that young Democrats keep going towards the Left of the Left, instead the center. Cortez even calls herself ’Green Socialists’.)

Dear Readers, this was the final Market update for 2018.

I wish you great holidays and a happy Christmas!

Have a nice day,

Mihály

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