The market behaved in a textbook fashion yesterday. After the CNN report about a potential Israeli strike on Iranian nuclear facilities, which could lead to the loss of 1.5 mbpd, if not more in case of an escalation, shorts understandably covered. The rally did not last. This nonchalant attitude is most probably the function of an inauspicious economic backdrop. Of course, in case of an actual attack, the market will most plausibly challenge the year’s highs, but for now, perception was quickly replaced by reality. And this reality showed falling Japanese exports to the US as the trade tariffs unmistakably started to bite. Closer to home, UK inflation accelerated to 3.5% in April, leaving the Bank of England with an unenviable dilemma whether to cut rates at its next meeting or stay put. Donald Trump’s tax bill, which is deemed to significantly widen the US fiscal deficit, is also in the centre of attention after last week's downgrade of the US’s credit rating. Equities and the dollar fell, and bond yields rallied.

Oil’s reversal of fortune was also aided by an unforeseen rise in US oil inventories. Total commercial oil stocks inflated by nearly 5 million bbls as the main categories, crude oil, gasoline and distillates, have all shown increases week-on-week. The builds confirmed the underlying trend as pointed out by a Reuters columnist that, based on data from intelligence firms Kayrros and Kpler, together with available data from the IEA, onshore and offshore oil stocks have grown meaningfully in recent weeks. If global stock build continues in the coming weeks, this market will need an undesirable geopolitical event resulting in palpable supply disruption to set oil on an upward trajectory. It could be triggered by acts, such as last night’s killing of two Israeli embassy staff in Washington DC.

Populism is not Dead, but Suffers

Whether an unconditional supporter or staunch antagonist of Donald Trump, it is undeniable that he is the most consequential US President of recent times. He is not an ideologist, which can be a blessing. In his case, however, it leads to capricious and divisive policy making that reverberates in every corner of the world. It comes with uncertainty, unpredictability and the resultant loss of trust and confidence in the US Administration. Making America great again is the primary effort of the President, the inevitable repercussion of which is the rewriting of the global political and economic order. Where it will take us is impossible to foretell. As the saying goes, prediction is difficult, especially if it’s about the future. The first four months in power, nonetheless, suggest that achieving whatever goals there are to be achieved will be an arduous task at best, and the road there might be paved with insurmountable obstacles, erected by the Trump administration itself.

During his inaugural speech, Donald Trump declared that his ‘proudest legacy will be that of a peacemaker and unifier’. So far, the success rate of this pledge is 50%. He has been failing to make peace, just read the front page of any newspaper. Vladimir Putin effectively manipulates him with no Ukrainian truce in sight. In the Middle East, the perpetually rising death toll among Palestinians in Gaza is also an unmistakable sign of his shortcomings. On the other hand, President Trump seems to have successfully unified the proponents of liberalism and globalism all over the world, recent elections and agreements indicate.

Last month, the former Canadian Governor of the Bank of England, Mark Carney, laudably rode the wave of anti-Trump sentiment and won the country’s federal election. It was quite a feat considering that before the US President said he had intended to make the northern neighbour of the US its 51st state, the Conservative party and its Trump-ally leader, Pierre Poilievre, were comfortably winning every poll. With the Liberals ultimately crossing the finish line first, Mr Carney vowed to stand up to US bullying and start negotiations on economic and security relationships with the US. Trade tensions are expected to remain at elevated levels. In Australia, the Labour Party, led by Anthony Albanese, claimed a resounding victory over its opposition, bucking the trend of the growing numbers of increasingly right-leaning voters in Asia. One of the defining factors for the Labour re-election was the US tariff policy.

In Europe, the picture is more nuanced, however, setbacks of the extreme right wing are clearly perceptible. German lawmakers signed off on a huge increase in defence and infrastructure spending, a seismic shift for the frugal state, precipitated by Donald Trump’s wavering commitment of and even animosity towards NATO and his lack of tangible support for Ukraine. In a blow to the US Administration, the European Union, regularly in the crosshair of the President and his acolytes over freeriding, immigration and free speech policies, has just recently agreed to reset the post-Brexit relationship with the UK in a tacit nod to free trade and the need for a common European security and defence pact.

In Hungary, the anti-EU stance of the right-wing autocratic government has led to unprecedented voter discontent and the spectacular rise of the biggest opposition party formed just a few months ago. In Georgia, the decision of the pro-Russian ruling party, the Georgian Dream, to suspend the European Union accession process triggered street protests and the consequent crackdowns. In Romania, the former centrist mayor of Bucharest, Nicusor Dan, beat his ultranationalist opponent, George Simion in last week’s ballot. In the latest Polish presidential election, the pro-EU candidate, Rafal Trzaskowski, received more votes than his nationalist adversary, although the result is not definite as they face a run-off on June 1. Should the moderate candidate prevail, the reform programme of the EU-friendly Tusk government would be unblocked. In Portugal, the rise of the far-right populists is worrying, but the centre-right Democratic Alliance won the first round of the parliamentary elections only to come short of a full majority.

Notwithstanding the convincing election results in Canada and Australia, the trade and security rapprochement between the EU and the UK and the growing political, military and economic gap between the EU and the US, global populism is still a force to be reckoned with. Yet, the discernible change in voters’ preference, partially the effect of isolationist and belligerent US policies, signals protracted disagreement between the US and its former allies at the expense of economic prosperity or greater common good, if you will.

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