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Whipsawed !

What a week ! 

The FED sent equities sky-rocketing by surprising them with an extra-dovish stance and economic numbers out of Europe sent equities tumbling on Friday. The same happened in currency, markets where the US dollar sold off sharply on Wednesday only to stage a massive rally again on Friday.

High volatility and “whipsaw” are characteristics of trend-ending moments and last weak marked a significant top in equity markets and an important bottom in the US dollar. 

The following chart of the SP 500 shows the clear reversal recorded on Friday marking the completion of the third leg of the bull phase in place since December 27th 2019. 

The S&P 500 has gone from an almost-bear market to come within 3% of its all-time high. 
This has been a remarkable recovery, most investors missed the January rise and it is statistically the quickest to come to within 3% of its high since October 1982.

Moreover, the momentum of the rise is ebbing. One of the most salient feature of the Q1 rally has been the strength of its momentum, breaking records of thrust of the past 40 years. But Optimism has now reached extremes again and the Mc Clellan oscillator is now showing weakness.

The correction that we had been expecting is upon us. 

It will probably last a few weeks and take the SP500 anywhere between 2680 and 2600 at worst, before the second bull leg of the cyclical bear market unfolds in the second quarter of the year.

We do not expect the correction to be lasting or profound and we see Asian markets doing better than their US and European counterparts in the coming few weeks. 

The global momentum is there, monetary policies are extremely accommodative, the US – China Trade War should provide positive news and even if economic numbers will continue to disappoint in the US and Europe, better news will probably come out of China soon.

This Week-end could be key for Donald Trump’s political future

UNITED STATES – JUNE 19: FBI Director Robert Mueller testifies before a Senate Judiciary Committee hearing in Dirksen Building on oversight of the FBI. (Photo By Tom Williams/CQ Roll Call)

The one negative that could have an impact on the markets is the probable release on Sunday of the U.S. attorney general’s summary of special counsel Mueller’s report on an investigation into Russian interference in the 2016 election and whether the Trump campaign coordinated with Moscow.

William Barr, the top U.S. law enforcement official, was examining a report sent to him on Friday by Special Counsel Robert Mueller, aiming to transmit a summary to Congress and the public by the end of the weekend.

U.S. House of Representatives Speaker Nancy Pelosi, a Democrat, said that Barr’s offer to provide congressional committees with a summary of the report’s conclusions is insufficient and that Congress required the full report and the underlying documents.

Global Economic Malaise showing in Manufacturing

March’s flash PMIs published yesterday added to evidence that GDP growth was subdued in the three largest advanced economies in Q1, with Germany continuing to take the brunt of the global manufacturing slowdown.

A weighted average of the manufacturing PMIs fell again in March suggesting that first-quarter GDP growth in advanced economies may come in much lower than most economists are forecasting.

After large falls in the previous two months, Japan’s manufacturing PMI for March was unchanged at a level consistent with industrial contraction in Q1. Weakness in the economy has reignited the debate in Japan over whether the government should delay the sales tax rate hike scheduled for October, which is expected to hit consumer spending in subsequent quarters. 

The US composite PMI dropped back as the manufacturing index fell further and last month’s jump in the services PMI was largely reversed. Combined with the weak hard data, it is clear that the US economy has slowed sharply this quarter. 

FOMC officials lowered their interest rate projections at their Wednesday meeting, announcing NO interest rate hikes this year. However, we cannot exclude the possibility that US policymakers end up doing much more to support the economy than they currently envisaged, as we expect, a true deflation sacre emerges in the scond half of the year.

If GDP growth stays below trend and undershoots the Fed’s forecasts, rate cuts are possible in the last months of 2019 or in the first half of next year. 

The composite PMIs for the euro-zone suggest that GDP growth remained sluggish in Q1. Germany’s manufacturing industry is going from bad to worse, in part driven by the unparalleled slump in external demand that has taken place over the past twelve months, a slump largely caused by Donald Trump’s trade wars. 

The German economy should grow by just 0.5% this year.  After the recent dovish announcements by the ECB, more policy stimulus is unlikely in the very near term but additional QE could be back on the agenda later in the year or in 2020

Chinese-made Italian “Belts” !

Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy. 

Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China. 

The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs. 

Deputy Prime Minister Luigi Di Maio played down the concerns, saying that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties. 

“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa. 

Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.

Italy is merely playing catch up as it exports significantly less to China than either Germany or France.  Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.

In a way, Italy has the same problem as the US but deals with it radically differently.

The Belt and Road Initiative lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.

Italy’s joining the Belt and Road initiative is a major political success for XI Jing Ping and illustrates the contrast between a super power that plays hardball with its neighbors and partners, closing doors and questioning globalization and a rising superpower that builds bridges and uses its financial clout to develop cooperation.

It is also a major success for Italy and ultimately Europe as the old continent is slowly but surely shifting its focus from the old superpower and its 300 million consumers to the new Asian one and its 1.3 Billion consumers.

Europe’s 500 million consumers and US$ 40’000 GDP/Capita and China’s 1.3 Billion with a fast rising US$ 7500 GDP/ Capita and a combined GDP of 24 Trillion will become a phenomenal driving force for the word economy, quickly leaving America behind.

Inadvertently, Donald Trumps’ Trade War has and is accelerating China’s rise to power and the transition of economic power in favor of China.

This significant event – An EU country joining the Belt and Road Initiative – is another proof that China’s long term Governance system is more efficient than America’s short term, electoralist governance system.

Electric Vehicles may be coming much faster than people think.

Norway’s capital city of Oslo will be the world’s first metropolitan area to install wireless, induction-based charging stations for electric taxis, in a bid to make a zero-emission cab system by as early as 2023.

Norway wants to go even further than that, however, and is mandating that all new cars sold in the country be all-electric by 2025. 

To pull off the taxi charging system, Norway is tapping Finnish utilities firm Fortum, which is working with US company Momentum Dynamics and the municipal government of Oslo to install charging plates in the road that connect to energy receivers in the vehicles themselves. 

The goal is to make it as easy as possible to charge electric taxis, as doing so now is cumbersome, time-consuming, and expensive. Using induction, which is more energy efficient, the taxis can be charged as they wait in what’s known as a taxi rank, or a slow-moving queue where cabs line up to wait for passengers. 

Here’s how Fortum describes the system working in its press announcement: 

“The future is electric, and it is already here, right now. Wireless charging is a potential game changer,” said Sture Portvik, Oslo’s electro mobility manager, in a statement. “From 2023 onward, all taxis in Oslo will be zero emission. Together with the taxi industry we will make sure that the shift is as user friendly and efficient as possible. Oslo will always be at the front of innovation and we are delighted to join forces with two of the industry’s most progressive players in this game-changing move to launch the world’s most ambitious plan for wireless charging of a taxi fleet.

Norway is only able to pull this off due to a number of logistical and economic factors. 

For one, the country has a population of only 5.3 million people, making it easy for the government to make large-scale, holistic changes to its infrastructure that in other, larger countries would take much longer and receive considerably more pushback. 

Additionally, Norway is not home to any automotive company that would fight taxes and other legislation that aims to incentivize citizens to use electric vehicles. As a result, Norway has exempted electric vehicle owners from certain taxes and given away benefits like free tolls and parking to those who use zero-emission vehicles. 


Norway now has the highest rate of electric vehicle ownership in the world, and it outpaces Germany as Europe’s fastest-growing electric car market. Last year, one of every three new cars sold in the country was an electric one.

By contrast, US citizens bought more than 17 million new cars last year, with just 1.2 percent of them being electric, according to the International Energy Agency.

China’s 4.4 % represent in excess of 1’000’00 electric cars sold there every year.

The mass scale implementation of wireless induction charging station is a milestone I. the development and adoption of electric vehicles and it is likely that from now on, cities public parking spots and private parking lots will be equipped with fast charging induction equipment.

Buying an Electric car will become the norm and this could happen very very fast with major consequences on oil prices.



The wild swings in the equity markets and the conflicting macro-economic signals send the US dollar flying on Friday reversing the trend of the beginning of the week and sending a clear signal that a phase of appreciation was about to start. 

The Fed’s announcement that it would not raise interest rates this year sent the Greenback tumbling on Wednesday as the massive long US dollar positions were unwound and then the extremely weak economic numbers out of Europe on Friday sent it flying again.

As always, the sharp fall in equity markets sent the Japanese Yen flying and it ended the week up +1.42 % while the EUR closed below 1.13 again.

Turkey’s banking watchdog announced it launched an investigation into JP Morgan and other banks after the lira plunged more than 4 percent and the main share index fell sharply on Friday. The lira was the worst performing currency in the universe last week as it lost -5.4 %, raising fears of another emerging market currency crisis. 

The Capital Markets Board of Turkey (SPK) said it launched the probe after receiving complaints that a JP Morgan published a report on Friday that hurt the reputation of Turkish banks and caused volatility in financial markets. The report was “misleading” and caused unnecessary speculation on the Istanbul bourse said the regulator.

JP Morgan’s report said it saw a high risk that the lira would decline after local elections set for 31 March and recommended clients to go ‘long’ on the U.S. dollar. Such advice is typical of client notes from banks globally but seems to have triggered some level of panic in the Forex market.



Most of the fall in equity markets happened on Friday after the Asian close so the numbers associated with Asia’s outperformance are not truly relevant. One needs to see how Asia opens on Monday. and it is likely that Japan will fall sharply considering the sharp move in the Japanese Yen.

Technically, there has been major reversals recorded de everywhere with Brazil’s 5 % fall marking the end of the bull run for sure.