Stock markets around the world have rebounded this week as talk of stimulus in China and Germany has given rise to hopes that pre-emptive action by policymakers can avert a global economic downturn triggered by President Trump’s protectionist policies. But with a US-China trade deal fast slipping away, do governments and central banks have enough firepower to prevent a new global crisis from unfolding? World interest rates have hit rock bottom With interest rates in most advanced economies not recovering [..]
The euro area is on the brink of yet another crisis, with Germany likely to enter a technical recession soon, as the export-heavy economy feels the burn of the US-China trade war and of Brexit worries. Although the ECB is preparing another dose of easing, monetary policy is already exhausted, and fiscal policy needs to step up. Sadly, any German stimulus is unlikely to be large and may take long to arrive, so any sustained rebound in the euro seems [..]
The trade war between Washington and Beijing has flared up, and looks likely to intensify even further, as Trump may use the conflict to score political points ahead of the 2020 US election. In the markets, while stocks may feel some pain, stimulus by the major central banks will likely offset part of those losses. Instead, a far better proxy for any future escalation may be the Japanese yen, which could appreciate further both through the risk sentiment channel and [..]
The British pound remains in the eye of the storm, as markets are waking up to the risk that a no-deal Brexit in October may be incoming Prime Minister Johnson’s preferred route. The coming week will be decisive, as the Cabinet ministers Johnson picks could reveal much about his strategy. As for sterling, the picture remains grim and a revisit of the $1.20 zone – or beyond – shouldn’t be ruled out, with signals for a General Election or a [..]
As sovereign bond yields around the world take a nosedive in anticipation of rate cuts by major central banks, the question once again being asked is how low can interest rates go. With rates in many regions such as Europe and Japan already in negative territory, have central banks run out of adequate scope to conduct effective policy easing? Bond yields tumble on recession fears Slowing growth and worries of a possible recession in the United States and elsewhere have [..]
The world’s oldest safe haven recorded extraordinary gains lately, as the ‘perfect combination’ of falling interest rates, a declining dollar, and general risk aversion amid recession and geopolitical fears fueled the rally. Given that these forces seem unlikely to abate anytime soon, the outlook for gold remains bright, with the key risk to this view being a potential trade ‘ceasefire’ that calms markets down. The global economy is clearly losing momentum, with uncertainty emanating from trade tensions holding back business [..]
Theresa May’s last-ditch attempt to secure support for her hard-fought Brexit deal failed dramatically on Tuesday with the beleaguered UK prime minister facing strong criticism from opposition parties as well as her own MPs. The pound has slumped on the overwhelmingly negative response to May’s tweaked Brexit offer to Parliament as a disorderly exit from the European Union once again started to look like a realistic prospect. After promising a “new, bold offer” on the Brexit deal, May was struggling [..]
The Eurozone’s currency has been driving on a slippery road for more than a year now and even if the 19-member bloc doubled its growth in the first quarter of 2019, downside risks in both the political and economic spheres continue to linger in the background, flagging another tough month for the euro. In the first three months of the year, GDP growth in the Eurozone was 0.4% q/q, which was twice the increase in the fourth quarter of 2018 according [..]
Investor attention has turned back to trade, as the US considers whether to launch another round of tariffs on China early on Friday (04:00 GMT). If tariffs are indeed increased, that would probably send stock markets plunging as investors brace for China’s retaliation, or worse yet for a breakdown in the talks. In the bigger picture though, the most likely endgame is still that a deal will ultimately be reached. After months of optimistic comments from both the US and [..]
US equity markets have been on a tear in 2019, reclaiming lost ground to come within breathing distance of their all-time highs. The rally has been fueled mainly by the Fed putting its rate-hike plans on ice, though easing trade tensions and corporate buybacks helped as well. While stocks could advance even further and break new highs, the risks seem increasingly asymmetric, with gains looking limited if growth stays solid but losses severe in case fears of a recession make [..]
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