The markets don’t seem to have integrated the fact that the planets are aligning for the United States while clouds are gathering in the European skies.
The markets are not yet taking into account three important points, namely that the:
– Drop in oil prices reduces the cost of energy in the US (see the drop in petrol prices); this is going to give an equivalent purchasing power to US consumers;
– US is close to launching its second-stage rocket – Fiscal QE – by reducing the tax burden for US companies;
– Closer consideration of oil exports is going to give the US even greater geostrategic power given that:
– It allows the US to continue its advances into South America and to help China. One would have to be naive to not see a certain causal link between the abandonment of commodities trading by the big international banks and the overall drop in the markets. It is easy enough to pin this drop on the downwards revision of global (and therefore Chinese) growth. However, if we look at the principle of causation, the exporting countries are the most vulnerable in this configuration. Indeed, the LATAM is mainly comprised of commodity-exporting countries (and, ‘strangely’, Mexico seems to be immune to this), whereas the majority of Asian countries will benefit from a drop in their currencies and in commodity prices. Indeed, Asia is China’s new territory for economic conquest (see, for example, the free trade agreement between Korea and China). This once again shows the acceleration of the bipolarisation of the world economy.
– The OPEC is going to have to take a new active member into account. This is going to change the geostrategic balances. Dubai has just announced the reopening of 43 oil fields to the tune of AED 10 billion. This should not, however, hide future strains on the government budgets of certain countries in the region. As we had said in Friday’s GMG, extraction costs are low in the Middle East. But social peace and the transformation of the economies come at a price..Before moving on to Asia, proof that the US Congress’ ‘elephants’ (the Republicans) are going to accelerate the energetic transformation of the US: The House of Representatives voted for the launch of the building of the strategic Keystone XL pipeline (such a symbol!) between Canada and the United States. With a Republican Senate, the final ratification thereof will be a mere formality.
In addition to the significant proposed merger between Halliburton and Baker Hughes (for over USD 20 billion), Actavis could well buy Allergan for USD 62.5 billion. This is a far cry from the Tax Inversion Deals, as these possible ties are happening between American groups. In total, It was a USD100bn day on monday with both Halliburton and Allergan deals.
