📢 Macro-News round-up
📈 Market News
📝 Friday’s derivatives expiry did not have much impact on the markets. More than 5.5 trillion dollars matured, but it does not seem to have left any new surprises.
🇺🇸 This weekend will see the first election debate between Biden and Trump. Close attention is still warranted to the tone, substance and fact-checking of claims, given the polarized political climate.
🇫🇷 Investors are demanding higher risk premiums on French debt and watching closely. If Le Pen outperforms, a cohabitation government may pursue a more pragmatic fiscal policy. A left alliance victory risks clashes with the EU over large spending hikes. Banks, utilities and construction stocks are most at risk from higher yields. Close monitoring is still needed of election outcomes and EU engagement.
📉 Early this morning, the Shanghai Composite SSE index lost more than 1%. However, Hong Kong’s Hang Seng HSI has recovered some of last week’s losses.
💸 According to Reuters, extensive cash outflows from mainland China into Hong Kong shows domestic investors have shelved expectations of an immediate recovery at home. The yuan has dropped to 7-month lows against the dollar, reversing equity investment flows into China, adding pressure on the currency. Mainland investors are seeking higher yields in Hong Kong as property sector stimulus disappoints and data continues to underwhelm. Expectations of peaking US rates, keeping Hong Kong dollar attractive due to its peg, is also drawing funds. Foreign investors who returned to Chinese markets have again turned sellers this month, withdrawing $4.54 billion.
📊 Market:
📉 Futures such as the mini SP500 remain tentatively positive after the Asian stock market falls. Friday’s contract expirations do not seem to have affected them. The Nasdaq 100, however, has had a significant pullback from the 20,000 level reached last week, possibly caused by the weakness in the semiconductor sector that we heard about on Thursday, is now above 19,750.
📈 US 2-year bonds remain above 4.50%. They are currently at 4.7%. The dollar, DXY, which reached almost 106 points on Friday, is now down to 105.60 and the EURUSD, priced at 1.07 again on Friday, is currently trying to recover from 1.0725.
📈 European markets remain positive after last week’s sharp falls. The Dax 40, which lost 18,000 points, is currently rebounding to the 18,250 point area. However, it has lost an important level in intraday charts, as it is trading below the 200-period average, which could indicate the beginning of a downtrend.
🌐 Geopolitics:
💥 Russia accused the US of being responsible for a Ukrainian attack with 5 US-supplied ATACMS missiles to a beach, full of civilians in Sevastopol, Crimea. Four people including two children resulted killed. The attack generated fury among Russian public figures and will elicit a response, though details were not given.
💣 The missile that hit civilians may have been guided by a US drone, coming from a NATO base over the Black Sea. ATACMS missiles would need US satellite systems in order to be guided, so some analysts see this as a direct US attack on Russia. Neither Ukraine nor the US have commented on the allegations, as Russia views Crimea as integral territory.
📜 Chronological facts that may clarify the context of the Crimea. The Russian Empire conquered the Crimean peninsula in 1783, during the reign of Catherine the Great. The Ukrainian state was founded in 1918. The Crimean peninsula became Ukrainian as a gift from the leader of the USSR, Nikita Khrushchev in 1954, who was Ukrainian. The US presence in Ukraine begins in 2014.
✈️ The Slovak government has asked police to investigate the former defense minister Jaroslav Nad for donating fighter jets and an air defense system to Ukraine. Nad donated a dozen grounded MiG-29 fighters and KUB air defense system to Ukraine last year to help defend against Russia. The defense ministry filed a criminal complaint against Nad, alleging treason, abuse of power and endangering Slovak airspace and citizens. The allegations stem from the previous government ruling in a caretaker role with limited foreign policy authority.
🛡️ Israel’s PM Netanyahu says the “intense phase” of fighting against Hamas in Rafah, Gaza is nearly over after more than 8 months of war. Israel’s defense minister is in Washington for talks on Gaza and tensions with Hezbollah, as cross-border attacks continue. Netanyahu said Israel will maintain military control in Gaza and wants to create a civilian administration with local Palestinians and regional support to manage aid. EU says delivering aid in Gaza has become impossible as the fabric of civil society unravels amid the dire humanitarian crisis. Hezbollah targeted Israeli
