Market update: Steady inflation curbs post-Powell excitement, next Iranian provocation awaited as tanker insurance costs skyrocket

by Mihály Tatár

Good Morning!

• A dovish Powell helped stocks and commodities even higher, but the fireworks were called off after US inflation refused to cooperate (2.1% Y/Y) and show a deflation threat so that the Fed could start cutting at a speed everyone was hoping for (SPX +0.23%, Nasdaq -0.08%, DAX -0.33%, Nikkei +0.15%, Shanghai +0.70%, EURUSD 1.1270, EURHUF 325.80, EURPLN 4.267, WTI 60.50, Brent 67 USD, Copper +2.5%). Investors were also reminded of the problems ahead by the shock contraction of Singapore’s economy (-3.4% Q/Q – given the city state’s importance in global trading, this gives you a feel of what must be going on in China behind the official data. Anyone yet remembers – at the time discussed here – when analysts talked about a ’mere 0.50% Chinese growth issue’ about the trade war last summer?). The market also noted that for the first time both Powell and Trump went after digital currencies (Trump: ’If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks’, ’I am not a fan of Bitcoin other Cryptocurrencies, which are not money, (..) unregulated Crypto Assets can facilitate unlawful behavior’). Bitcoin’s reaction was relatively muted (-4%) but from now on we are one scandal away (especially if it has a connection to China, sanctions or immigration etc.) of a large-scale crackdown.

• While everyone was waiting for the next major Iranian provocation (after a UK Navy frigate had to save an oil tanker from five armed Iranian boats, which resulted in Middle East tanker insurance costs rising 10-fold– one has to wonder where is the EU Navy protecting sea routes? or when one of these bloodless sea pirate actions accidentally turn lethal and uncharacteristically patient-with-backdoor-talks Trump is forced to unleash his hawkish National Security Adviser ’Bomber Bolton’ to save face) – US Democrat candidate Joe Biden gave a major speech promising to restore ’the world order.’ (Which, of course means the situation under President Obama. Whether you liked that is of course a world view question – personally what pops to my mind first is the France-sized Islamic State, China destroying the US and German solar industry or Russia humilating the West in the Ukraine – but hey, it is undeniable that Obama was very popular! It’s worth mentioning that many on the Democrat side didn’t like the speech, as it was meant for ’center’ Democrat voters and was very short on progressive topics (from climate change to welfare issues). Expect the infighting turn much more aggressive (or as Obama himself described it, what will come is ’the circular firing squad’).

Have a nice day,

Mihály

If you liked the post, follow Barrelperday on Facebook!

Or subscribe to our Twitter feed or Newsletter