Market Morning: German Bank Megamerger, Brexit Vote Tuesday, China Cools Trade Talks, Oil Deficit

Commerzbank, Deutsche, In Merger Talks

Story continues below

Germany’s government has been pushing for it since late last year, and now it’s becoming clearer that it will eventually, probably, happen. Two of the sickest banks in the world, mired in a few scandals to boot, yet extremely interconnected that carry systemic risk if they fail, are in talks to merge, informally speaking. Commerzbank (OTCMKTS:CRZBY) and Deutsche Bank (NYSE:DB), whose stocks have performed absolutely dismally since the last financial crisis, are clinging on for dear life and are finally moving towards the negotiating table to see if they can salvage whatever it left of their market caps if they try to salvage it together. Commerzbank is down 98.5% since April 2007. Deutsche is way outperforming comparatively, down only 94% in the same time frame. Good for them. Something to hang their hat on, if it hasn’t already been eaten.

SEE: Cannabis Stock News Weekend Roundup

Biden Wins Iowa Poll, Tantalizes As Potential Non Radical Socialist On Ticket

He hasn’t announced that he’s running yet, but he might soon, given that an early poll in Iowa has pegged him as the winner of the democratic voting field, followed up by socialist Senator Bernie Sanders, who for his part had praised the Soviet communist system as recently as 1988 when it was on the verge of total collapse. Joe Biden, Vice President under President Obama who has been pretty quiet since leaving office, is an old-school democrat that doesn’t exactly fit in with the Bernie Sanders Alexandra Ocasio Cortez, Ilhan Omar crowd of hard core socialists with grandiose schemes about outlawing internal combustion and air travel. The guy is 76 years old, so if he wins, he’d be in his 80’s before the end of his first term. Sanders would be even older. Still, Biden has fallen since the last poll, with the momentum clearly going to Sanders, so maybe the socialists will win the democratic nomination in any case. Medicare-for-all, which would further bankrupt an already bankrupt federal budget with trillion dollar deficits in the time of supposed economic prosperity, was supported by half of likely caucus goers. This should turn out well.

Breaking Brexit News: It’s All A Mess And Nothing Has Changed

Brexit vote again this Tuesday, and it’s expected to crash and burn, fail spectacularly, and other superlatives, because British Prime Minister Theresa May hasn’t secured any concessions from Brussels at all, which is what was to be expected. With a defeat almost certain 2 days from now, the question is what happens next. Either Brexit will be delayed and Article 50 extended, which would probably mean Brexit will never happen, or there will be a no-deal Brexit, following which every financial newspaper in the world will preach imminent Armageddon and mass starvation in the streets of London. Unless May has some sort of surprise up her sleeve, like offer to put her deal to a second referendum if it passes parliament, which would allow Brexiters to vote for it even though they oppose it just to see if the people want it or not. After the vote on Tuesday, the Brexit countdown will be at 17 days.

China Throws Cold Water On Trade Deal Optimism

It was optimism on a potential trade deal with China that has pushed global markets higher in recent weeks, but that narrative could be unraveling just a bit as Jerome Powell’s Chinese counterpart Yi Gang said that China had certainly not committed to keeping its currency stable. As both the US and China are heavily Keynesian-influenced money-printing pump-priming aggregate-demand-reading economies, if China gets stuck with having to keep its currency stable, it’s basically abandoning its inflationary powers to a US monopoly, which doesn’t seem fair when the only tool you have as a central bank is basically to inflate. Yi’s words to express this were that the two countries had agreed to respect the autonomy of the other’s monetary policy. Meaning, there would be no commitment to keep one stable relative to the other, and both would continue in their race to the bottom. Now let’s see if President Trump will follow through on his threats to label China a “currency manipulator”, which is basically what all of monetary policy is, when you get to the bottom of it.

Oil Entering Supply Deficit Due to OPEC Cuts

Oilprice reports that the global oil (NYSEARCA:USO) market is about to enter a supply deficit due to the ongoing OPEC supply cuts on the back of the most recent plunge in oil prices. Inventories are set to fall below the 5 year average, though Barclays (NYSE:BCS) believes that a small surplus will return by the second half of the year. Meanwhile, also on the oil front, the US will reportedly surpass Saudi Arabia this year in the volume of exports of liquid energy products including oil. That doesn’t mean that the US is a more efficient producer of these products, but only that the US is exporting more by volume.

 

An ad to help with our costs