Market update: Stocks, oil prices retreat with earnings blamed, Brexit deal called dead, sea tensions increase

by Mihály Tatár

Good Morning!

• Stocks performed a global retreat (SPX -0.65%, Nasdaq -0.46%, DAX -0.72%, Warsaw -0.66%, Nikkei -1.81%, Shanghai -0.60%), attributed to mixed earnings (IBM, Ebay, Bank of America did well, while Canon, Netflix and CSX  – the latter is the third-largest US rail operator – plunged). It also didn’t help, however, that the US economy still continues to be too healthy for the aggressive Fed rate cuts that the market demands, and there were also no developments on the US-China trade deal (apart from Trump threatening that ’more tariffs are possible’, suggesting a stalemate). Because of the latter, oil prices remained under pressure (WTI 56.70, Brent 63.70 USD – if you remember WTI refused to rally above 60 USD despite the powerful stock rally, as noted at the time. On top of the demand worries, Iran ruled out shutting down the Strait of Hormuz – forcing several geopolitical positions to stop out.)  In the EURUSD, the ’Godzilla versus Robogodzilla’ situation remained (1.1240 – with the US wanting a weaker Dollar, but the dovish-talking ECB, and especially the super-bad German economic data making it impossible. Don’t think Trump has given up, a way will be eventually found), while the steady depreciation of the British Pound reached 1.24 against the Dollar. (Boris Johnson announced, in a Trumpian style, that the Withdrawal Agreement is ’dead’ and ’needs to be junked’. Auch – this will cause quite some more uncertainty, because, if you remember, that was the ’final’ deal the EU was willing to make. As a sidenote, showing how much she still doesn’t get it, May warned that ’failure to compromise’ will result in Parliament not supporting Johnson’s plans. Well, she was compromising all the time – agreeing to every single demand until the agreement was worse than a post-war punishment contract and no British politician of standing was ready to sign it.)  Regional currencies continued to weaken against the Euro (EURCZK 25.63, EURPLN 4.268, needless to say, the most the Forint, EURHUF 326.60, approaching the key 327/327.50 zone. Anyone yet remembers, that according to analysts early this year, EURHUF is doomed to fall to 307?).

• Shocking mainstream media commentators, but coming as no surprise for regular readers, Republican support for Trump actually rose after the ’racist’  ’go back’ tweets (by 5% to 72% from one week ago). This really shouldn’t be a surprise: People are getting tired of one side calling the other side racist/Nazi the moment they hear something they dislike and have no arguments to counter. (Judging from the articles, Democrats are clearly frustrated, not knowing how to handle an opponent who fights back after getting the R-treatment. So far, no evolution from 2016.) In the meantime, in developments that don’t bode well for a peaceful future and the rule of law on the seas, Turkey essentially laughed at the EU (after Brussels threatened to suspend negotiations on deals and reduce funding if Ankara doesn’t stop drilling off Cyprus – even if there would be a unified EU voice and an army, with the migrant keeping deal in the background, I wouldn’t be afraid either), and Chinese sea vessels increased the intimidation of Malaysian and Vietnamese oil and gas ships, pushing the two countries further towards Washington.

Have a nice day,

Mihály

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