A Week On The Market: Noisy, Intense, Nervous

A Week on the Market (19.08 - 23.08): Noisy, Intense, Nervous

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Euro Returned To Three-Week Minimums

In April-June 2019 the GDP of Germany decreased by 0.1%, compared to the previous quarter, which came out of the blue for the capital market and investors. Naturally, this data had an adverse effect on the GDP values of the whole Eurozone: in the second quarter, the indicator grew by just 0.2% against the 0.4% the first quarter. The statistics made us worry about the possible recession in the German economy, so the Euro declined.

Federal Reserve System: Blackout Period

Chairman of the Federal Reserve System Jerome Powell prohibited public speeches and participation in conferences for the board of governors members. It is likely that this might be due to the pressure of the White House: last week there roared another scandal when President Trump accused the Fed of being useless and their credit and monetary policy inefficient.

A blackout is something new for monetary politicians; the last couple of years, the Fed tried to be as transparent as possible for investors and economists in order to avoid excessive market volatility due to multiple guesses about its credit and monetary policy.

USA Debt Market: Clear Signals Of Recession

Last week the US treasury bonds sector made the market more nervous than ever. The situation with the two-year and ten-year government bonds inverted. Simply speaking, the return on the short-term bonds turned out higher than on the long-term ones, which are a bright signal of an upcoming recession for economists. The recession though is expected not now but some 12 to 18 month later. However, this does not make the perspectives more optimistic.

Argentina: Bull Hunting Season

Last week, the Argentine peso declined steeply after the primaries. The Argentine exchange index Merval fall as well. This is the reaction on the domestic news, which is the victory of the left-centrist candidate Alberto Fernandez. This promises nothing good to the country, and the market reaction was immediate. In these circumstances, the Minister of Finance has resigned already.

Hong Kong Protests Do Not Subside

Hong Kong remains a risky zone: the protests do not subside. Initially, they were connected to the judicial review of the amendments to the extradition legislation. The amendments qualify Hong Kong to extradite offenders to those countries which Hong Kong does not have the necessary agreement with. People think this is a part of oppressing activists and all those contradicting the existing government. Protesters require full cancellation of the amendments and introduction of general elections. For the capital market, the Hong Kong turbulence is yet another reason to seek refuge in safe-haven assets.

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