Big problems
A two-week sale has lead to this year’s minimums renewal. The European indices DAX and EURO STOXX 50 have reached their lowest positions for the first time since November 2020 this Friday. Besides, fundamental factors that provoked the dropdown are still accurate. Here we speak about straightforward monetary policy restrictions introduced by the majority of the world’s banks. Meanwhile one of the largest Eastern Europe countries is at war at full pace. Considering that, the bearish scenario continues to dominate the market.
A rise in the key ECB interest rates has lead to a considerable business activity slowdown in most of the EU countries; high inflation and thus to increased attention towards defensive assets.
Stock market sales and an increase in demand for government bonds and the greenback are the main tendencies.
We still can’t talk about leaders and outsiders in indices, since 90% of the securities test negative dynamics. Asset purchase is still inexpedient.
Bond market:
The last week was notable for its EU countries 10-year yields growth. British bonds remained in the leading position; however the trend is globally bullish throughout the EU and also the US.
Considering the Federal Reserve strict policy in terms of inflation, there’s a real chance of the long-term key interest rate increase. The ECB and the Bank of England will follow the FED which in turn will put the bonds under the pressure. Moreover, it is time to face the music; the recession is unavoidable in Europe and is very probable in the US. As you might have concluded, it is yet another reason for government bonds to grow and for the stock market sales to be held.
Oil market
The ‘black gold’ has turned red. It may be that it isn’t for long as it also reacts to a global economy slowdown. The last week dropped the WTI and Brent prices leaving them close to the current year’s minimums. The bear scenario is in until there are any global changes in the stock markets or until the next really strong bullish fundamental factor.
Last Sunday the UAE and Germany have had a discussion regarding the ‘energy security’ agreement which supposed the liquefied gas and diesel delivery, as Berlin seeks another energy provider to substitute Russia. This piece of news may be welcomed by the stocks market, however it does not seem to lead to any global mood changes.
Key events
Germany prepares a GDP report today. Currently we can still talk about growth since the Q/Q and year/year ratios are 0.1% and 1.1% accordingly as the consensus forecast suggests. If Berlin releases weaker data, it would cast extra pressure on the German companies stocks. On Thursday Germany reports on its inflation. The forecasts are predominantly negative; September’s 1.1% CPI growth is taken into account. It may become the maximum growth since April, this year. It is worth mentioning, CPI never grew higher than 1% since 2004 till April 2022. This is yet another reason to quit the German securities.
