Stock markets may be crashing on inflation fears, but watch the Putin Xi summit in Samarkand tomorrow as the critical event this week. Is China prepared to reinforce Putin’s failure – and what does that mean in terms of risk?
The news looks bleak. A cataclysm of gloom is set to sink Europe and the UK – but, maybe things aren’t as bad as we think. Good news and a realisation things can get better could stabilize sentiment, and build a recovery base. Maybe?
Readers of a sensitive nature may wish to take a chill pill before reading this morning’s Porridge comment. Remember, the sun will come up tomorrow. The market might not.
The pace of US CPI inflation moderated slightly, but it’s too early for the market to conclude rate hikes are over. There are many imbalances still to resolve – especially in consumer credit. Meanwhile, the new UK premier’s clumsy attempts to blame the BOE raise questions.
Chips are a critical component of global supply chains – there are significant geopolitical risks inherent in the concentration of semi-conductor production in Taiwan. However, an even bigger geopolitical risk may have been triggered by the FBI raiding Trump’s lair in Mar-a-Lago.
In bonds there is truth: Apple’s Jumbo $5.5 bln corporate bond deal hints of a firmer market to come. A clear divide between US Recovery and European Slowdown is increasingly apparent – a weaker Euro will further add to European problems.
The US has been a great Anglo-Saxon creation and experiment, but the way in which 6 conservatives hold the reins of power, and are showing they are prepared to flex them is causing rising doubt.
The US just took another step towards the end of the Age of American Exceptionalism. It will have major consequences on markets and geopolitics. The West has limited time to prepare for some profound changes.
Markets and Geopolitics intersect in the Great Game being played in Ukraine. The West’s economies are diverging as a result of inflation shocks and looming recession. Divergence will play into Russian’s hands, and presents a clear market strategy: Buy Dollars and Sell Europe.
Ultimately the economic history books will record Russia’s invasion of Ukraine as a speedbump, and perhaps a triumph for a United Europe. The consequences of an Economic War with China could be much, much more significant!
