And so here we are again: yet another chemical attack, real or presumed, has made it possible to strengthen the Anglo-Saxon axis between the UK and the USA, as if Brexit weren't already enough to reinforce it. Prime Minister Teresa May breathes a sigh of relief from internal political problems and the Brexit stalemate, just as Trump US shifts the attention of the electorate at a time when scandals and consensus under scrutiny are gaining the front pages. Even for Macron, who joins the military reaction announced Friday night on Syrian targets, distracting attention from internal problems comes by the way. And the Saudis are also taking advantage of the jump in oil, expected to reach 80 US dollars shortly, and the focus of attention on the Syrian theater of war to "leak" Saudi Aramco's "tame" data and relaunch a takeover bid that seemed to be postponed date to be set.
This second quarter starts from the trenches of an endless war that began seven years ago and has turned into a geopolitical risk that poses many uncertainties to the financial markets, which at this point are questioning the outcome of the global growth trend. And if inflation is not a problem, and is seen to be under control overall, there is no doubt that globalization has been taking enormous steps backwards for some time now, affecting the profits of large corporations and thus forcing the US administration to play the trade wars card. With the release of the company quarterly reports, this second quarter could resume the path abandoned by recovering on the performance of share prices, or it could suffer a further decline estimated at 5%.
It suffices to carefully read the report by the US Treasury Department published on April 13, "Macroeconomic and a Foreign Exchange Policies of Major trading Partners of the USA": it focuses on the major trading partners of the United States to bring into reality the analysis presented President Trump's strategy. Bilateral trade and the related trade deficits with China, Japan, Germany and Mexico are the ones that create the greatest concern, and which are analyzed by including India to make a careful assessment of the currency effects of these trade relations, because Donald Trump's action "via tweet" was focused on the US dollar/excessive surplus dynamics and not only.
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And while the Russians announce that most of the missiles have been intercepted, 71 out of 103, and insist that they have not poisoned the secret agent Skripal in Britain and they have not used chemical weapons in Syria, Putin and his followers suffer the plan of growing sanctions that hit the activities of the Russian oligarchs and have thrown the aluminum market and the ruble into panic. The Chinese, on the other hand, are keeping away from the Syrian conflict, already having their work cut out for containing the North Korean leader, and are renouncing competitive devaluation against the US dollar. A dollar that remains hostage to the conflict in the range between 1,21-1,25 against the euro without particular operational cues but under close monitoring by the Fed. The second week of April closes with aluminum rebounding by almost 15% while the main corporate of the Russian sector Rusal, owned by the Russian oligarch Deripaska, recovers 5% of the price which had fallen by 60% at the announcement of the new sanctions.
In turn, the rating agencies intervened by withdrawing Rusal's rating, after the Rio Tinto chairman froze supplies to Rusal in the middle of the week, and the Glencore CEO had left the Rusal board of directors. AND the Russian ruble recovered about a third of its 15% loss, reaching interesting purchase levels but too conditioned by the effects of the forthcoming sanctions which will be activated from the month of May. The Brazilian real also recovered at the end of the week but without much conviction, while the Turkish lira didn't even try. In this crescendo of volatility for equity and currency assets, only SRI investments contain losses and do not lose ground, perhaps a sign that if there is any hope that this protagonism of war will take a step back before it is too late and that Iran take the field.
