- Donald Trump fired State Secretary Rex Tillerson
- Tillerson was more moderate on many key issues
- OIL and US500 can be among markets influenced by this decision
After a departure of Gary Cohn, a firing of Rex Tillerson could be another step towards a more radical and unpredictable White House. We take a look at major differences between president Donald Trump and his ex-State Secretary and consider possible market implications.
Nuclear deal with Iran
This might be the most important difference between the two politicians. President Trump has continued to criticized the deal that lifted some sanctions on Iran under the Obama presidency and seems to be ready to withdraw from it. Tillerson supported the deal saying that the US needed to cooperate with European partners to ensure that Iran complies with the rules. Iran is an important oil producer and was able to increase its exports significantly once sanctions were lifted.
Geopolitics: North Korea and Israel
Trump and Tillerson often differed on their stance towards North Korea. Last year Trump publicly ridiculed his Secretary saying that he should “stop wasting his time” negotiating with the regime. It seems like a president had a major change of heart, agreeing to meet with Kim Jong Un but it wasn’t Tillerson’s persuasion – he was not even consulted. President also turned a blind eye on Tillerson’s concerns related to controversial relocation of the US embassy from Tel Aviv to Jerusalem. Overall, Rex Tillerson often worked as a cushion to president’s brute approach, a cushion that will now be missing.
Paris Climate Accord
Donald Trump pulled off from the Accord last June despite an opposition from Tillerson who was still saying three months later that the US could re-join “under right circumstances”. It seems like a departure of strong personalities from White House could see the US pulling off from other agreements as well and introduce one-sided protectionist measures.
Stance on Russia
Let us recall that a year ago markets seriously considered an impeachment scenario when revelations about involvement of Russia in the presidential elections broke out. Tillerson publicly admitted that Russia indeed meddled during the campaign and just days ago accused Moscow of direct involvement in poisoning of the ex-Russian spy Sergei Skripal. Donald Trump took a much softer approach making himself vulnerable to accusations on links with the Kremlin.
Markets to watch:
Should the US reintroduce sanctions on Iran, a possible drop in production could reduce global supplies more than all the OPEC efforts. One could imagine how serious consequences could be. Although Tillerson’s departure does not automatically lead to such decision, risks have certainly increased. On the chart, we can see that a 150-day moving average keeps serving as a support and a price is locked in a short-term triangle formation, making an impulse move quite likely in a near term.
Oil prices could be affected if Trump puts a deal with Iran at risk. Source: xStation5
Although Wall Street has recovered from a February slump, we can see that there’s much more volatility on US500. A rebound has reached a 78.6% retracement of a correction so technically bears have an opportunity to attack. We can observe a relatively larger volume on “down” days, a sign that bears are yet to throw in a towel. Any signs of trade wars escalations would be the most serious threat from the political point of view.
Bears on US500 are yet to give up following a major pullback in January. Source: xStation5