Market update: All eyes on China’s real reaction, Farage strikes back

by Mihály Tatár

Good Morning!

• Short sellers closed out some positions before the US and UK long weekend, resulting in a positive finish (SPX +0.14%, Nasdaq +0.11%, DAX +0.49%, Nikkei +0.27%, Shanghai +0.12%), but the one billion Dollar question for everyone remained whether China would indeed strike back or gradually return to the negotiation table (WTI 58.40, Brent 68.70 USD, Copper +1%). (Note that Chinese Industrial Profits – already not too high – dropped by 3.7% in April – and in a rare verbal intervention Beijing warned against shorting the Yuan. A lot of people however, couldn’t care less about the Dollar-Yuan exchange rate and went around official barriers and fled the Yuan through crypto currencies – Bitcoin surged 110% since early April, altough Facebook’s crypto project, humbly called GlobalCoin, had its sentiment effect as well for sure. One has to wonder how long the Fed, the ECB and the PBOC will tolerate the developments.)   The Pound and the Euro bounced on May finally throwing in the towel and on the media narrative that the ’populist attack on the EU fell short’ (GBPUSD 1.2740, EURUSD 1.1210, in the latter, a very weak US durable orders data also helped). Spinning the story this way is amusing, by the way, because up until this election the narrative used to be that EU elections are in fact local referendums on the local governments. Anyway, if you consider that Farage’s Brexit party collected 38% (Conservatives 9%, Labour 14%), Salvini’s League in itself 30%, Le Pen beat Macron 23%-22% and the German coalition parties dropped further (CDU/CSU 29% from 35%, SPD 15% from 27%), Austria’s right wing parties together reached 40% despite the professionally-timed femme fatale scandal, Hungary’s Fidesz got 52%, Poland’s PiS 42%, I am not sure whose argument on Federal and Pro-Migration Europe fell short here. Also note that if there was any hope that at a  second referendum, a ’young voter uprising’ would kill Brexit or that the EU simply punishes the UK with a humiliating second tier membership and then life goes on, these are now dead in the water. (And Trump hasn’t even entered the fray yet!).

Have a nice week,

Mihály

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