Equity markets rebounded this week while bonds experienced a correction.
Apart from a technical lift on the last day of the third quarter, markets retreated as a fresh wave of bad political and economic news arrived.
Once again, markets danced to the tune of developments in US politics and the trade war.
The Democrats started a pre-impeachment procedure against Donald Trump. Washington is still looking for a broad agreement with Beijing, one that goes beyond simply settling agricultural issues. However, Donald Trump's speech to...
Hopes for a week of reduced geopolitical tensions following renewed dialogue between the US and China were dashed when a Saudi Arabian oil facility was attacked by drones, escalating strained relations between Iran, the US and Saudi Arabia.
US-China tensions eased further over the week and Beijing exempted US products from import duties only a few days before both sides were due to meet for talks.
Equity markets finally rebounded on reduced tensions in Hong Kong, mounting obstacles in Boris Johnson’s way towards a no-deal Brexit and news that US-China talks were to resume.
Political declarations took centre stage this week, starting with the usual twists and turns on the trade war front. Following a tit-for-tat escalation in customs tariffs, the mood turned more conciliatory and talks will now probably resume.
Investors wait for the Jackson Hole Symposium
The US Commerce Department’s lift to markets at the beginning of the week soon fizzled out.
Markets struggled to regain their calm although the risk of Chinese currency manipulation abated.
In the last 6 trading sessions, equity markets have fallen sharply with the S&P 500 and the Eurostoxx 50 down by about 6%. Yields on core government bonds have plunged, down 30bp for 10-year US Treasuries and 15bp for the German Bund which is now yielding minus 0.52%
It was a difficult week on equity markets although investors should have been reassured by the Fed which cut its rates by 0.25%. Instead, they were thrown off balance by Jerome Powell’s accompanying comments which failed to provide a clear endorsement of a series of cuts in the months ahead.
Central banks once again remained centre stage. Judging from falls in the euro and European sovereign bond yields, investors were clearly expecting big developments over the week. And yet the ECB meeting raised more questions than answers.
Unconvincing results and fresh US-China tensions leave investors hesitant.
Markets are still strongly influenced by central bank announcements. Jerome Powell’s statement this week at the House of Representatives was eagerly anticipated. He stressed the confirmation that uncertainties regarding global trade and the strength of economic growth were still in evidence, against a backdrop of a...
Global growth is slowing smoothly but the week’s PMI and ISM data revealed some resilience in developed countries thanks to buoyant consumption and services.
Pre-G20 summit stress kept markets on tenterhooks throughout the week, leading global indices to trade within narrow limits. The weekend’s summit will be decisive.
Mario Draghi at the ECB once again said the bank had a number of tools it could use to boost inflation and the economy as worries over the outlook sent long and short eurozone sovereign bond rates even lower.
Risk assets gained further ground but trod more cautiously than in the preceding week. This is only natural as the FOMC is on June 18/19 and the G20 will take place at the end of the month. Both events will be decisive for market trends in the coming months.
The week kicked off with an increasing amount of disappointing economic data, particularly in China, prolonging concerns over growth and driving investors’ risk aversion sharply higher.