International review. Rain in Spain again

The trade war seems to be catching the news later…

…Will tariffs imposed make up for at least part of the lower tax revenue? Or is it just about irritating trading partners, even the good ones. Trudeau’s words on allies at heart feeling betrayed and insulted were quite catching to say the least. Again, President Trump’s twitter messages didn’t help, although pressure from allies to moderate tone aimed to calm things down, now claiming the incident is only a “family quarrel”. G8 weekend meeting and his suggestion of adding Russia as a lucky number did not make things any better.

In Europe, the economic slowdown is now a reality which contrasts sharply versus the last US employment figures. Will be an exercise to follow whether Europe is turning the economic cycle.

Spain and Italy (the latter with yields above 3%) are heading back into political turmoil. Differences mainly remain in Spain remaining with a pro-European stance, but also on the way events have taken place.

Sanchez makes the cover on sunday’s FT editorial. Astonishing, exhilarating, just amazing was the peaceful parliament “coup”, a Sanchez masterpiece annihilating both right wing parties in just a few hours of vote and just few days before all ministers’ cabinet being removed. Truly a masterpiece with extremely accurate appointments, honoring previous budget commitments, securing the female vote by appointing 11 female ministers for just 7 men, including an astronaut! Special mention to Borrell foreign ministry, and huge message for catalan independents. The message is doublefold, since it also ignores claims of their partner deal makers, mostly left and independents, sending an extremely tranquilizing message to markets and international community. Top reviews for the change so far.

Looks like, after cleaning the mess (26% unemployment and in the verge of rescue) Rajoy played it just into Sanchez hands leaving Rivera out of the picture. Now the question remains if such a minority, with 84 seats out of 350 and less than 24% of the lower house can truly rule. Also to be seen is the reaction of some key corporate IBEX 35 names who turned their backs on him in the primaries and those who where reaching out to Ciudadanos.

More stability the emerging markets,  Argentina with its 50 bill IMF generous and merited package, and Turkey stabilizing their currency by lifting rates now cooling off. Not so much Brazil where political uncertainty reigns with a falling real nearing R$4. Focus will now turn to Mexico and Lopez Obrador. Not terribly concerned on the peso and its outcome!

more to come…..


Rafael Salama Falabella


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