Market update: German factory orders plunge faster than the size of Deutsche Bank, Barcelona is in Italy

by Mihály Tatár

Good Morning!

• Traders were somewhat disappointed by the healthy US employment report (224.000 jobs added in June, hourly earnings rising 3.1% Y/Y, hardly a sign of a brutal slowdown that forces the Fed into a series of rate cuts – and this compared with the performance of the Germany industry, where factory orders plunged by a brutal 8.6% Y/Y, a figure usually being seen from developing countries). Further not helping the mood, Japan threatened to remove South Korea from a list of trusted semiconductors and computer part buyers (!), after South Korean courts ruled that Japanse companies must compensate Koreans conscripted to work during the 1910-1945 occupation (SPX -0.18%, Nasdaq -0.10%, SPX futures -0.30%, DAX -0.49%, Nikkei -1%, Shanghai -2.27%, EURUSD 1.1220). The other news were mostly negative, as well: 1. The Turkish Lira dropped more than 3% after President Erdogan suddenly fired the country’s central bank governor (note that this was not a rush decision as the media portrays it, he told his ruling party that everyone must get behind his long-time conviction that higher interest rates cause inflation and not the other way around– this probably won’t go well with the remaining foreign investors). 2. Iran threatened that it will breach uranium enrichment levels set out in the 2015 nuclear accord (’any amount we want’, meaning, weapons grade, good luck EU for explaining this away. A US answer will come soon, at first probably in the form of new sanctions and green-lighting proxy attacks), which helped supporting oil prices (WTI 57.50, Brent 64.20 USD). 3. To no surprise for regular readers here, ’saved and successfully reorganized’ and ’great partner to merge with’ several times within a decade Deutsche Bank unveiled a dramatic overhaul of exiting its equity business, firing 18,000 employees, cutting risk-weighted assets by 40% and creating a gigantic bad bank to clean the balance sheet. (As usual, the CEO found it necessary to talk about ’tackling what is necessary to unleash our true potential’, which is very rich even by today’s honesty standards, as what is really happening here is that the once mighty, and globally important ’does everything and anything’ German bank goes home and dismantles itself.)

• In another strong indication that the future looks like in the movie Idiocracy, while wildly popular Love Island tv show players discussed whether Rome is in Italy or Italy is in Rome (endig it by declaring that in fact Barcelona is in Italy –  it’s good that it’s settled now – remember that this level of European education will compete with Chinese kids who spend their summers in math and science camps); Berlin was shocked, shocked to learn that the US formally asked Germany to send troops into Syria to help Kurds fight terrorist militias. (Remember, Merkel promised exactly that, and cited this when defending Berlin’s NATO performance. Note that the decision will be interesting from the angle of the dynamically organized European Army as well.) In the meantime, in Libya, the fighting for Tripoli intensified to the point that 44 migrants were killed in a single airstrike on a UN detention center – its not clear if the attack was a mistake or somebody decided that it’s time to put some pressure on Turkey (the biggest supporter of the government, which General Khalifa Hafter wants to topple) to intervene.

Have a nice week,

Mihály

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