Pre-poll investor jitters stress the US stock market

2020 ◽  
Keyword(s):  
Stock Market ◽  
Interest Rates ◽  
Euro Area ◽  
Emerging Market ◽  
Capital Inflows ◽  
Content Type ◽  
The Us ◽  
Bond Funds

Significance On September 3, the benchmark S&P 500 index suffered its sharpest fall since early June having gained more than 50% since March 23. Expectations for future volatility in the Nasdaq 100 index, a gauge that includes tech giants Apple and Amazon, this month hit a 16-year high relative to the rest of the stock market and remains elevated. Impacts The Federal Reserve’s move to target average inflation and tolerate periods of higher prices may keep interest rates ‘lower for longer’. The trade-weighted dollar has lost nearly 10% since March, helping the euro to surge and exacerbating euro-area disinflationary pressures. Capital inflows are starting to return to emerging market bond funds, which lost an unprecedented USD120bn earlier this year.

Turkey’s new economic team acts to restore credibility

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Interest Rates ◽  
Late Stage ◽  
Emerging Market ◽  
Content Type ◽  
Finance Minister ◽  
The Us ◽  
Multiple Interest ◽  
The Eu

Significance In one of the most significant changes in direction in a major emerging market (EM) in recent years, newly appointed TCMB Governor Naci Agbal has tightened monetary policy dramatically while abandoning a convoluted system of multiple interest rates. With another technocrat, Lufti Elvan, appointed finance minister, monetary policy could be returning to normality. Impacts A Biden administration is expected to prove unaccommodating towards Turkey, especially given its purchase of a Russian air defence system. This may be leading Erdogan to extend feelers to the EU, recently promising reforms and insisting Turkey is an “inseparable” part of Europe. Anti-coronavirus vaccines’ late-stage trial results are encouraging market optimism, with the US stock market hitting a record this month.

Normalisation threatens Emerging Europe’s bond markets

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Emerging Market ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Content Type ◽  
The Us ◽  
Asset Purchases ◽  
Investment Grade

Subject The risks to Emerging Europe’s bond markets from the removal of monetary stimulus. Significance The IMF has warned that the withdrawal of monetary stimulus by the US Federal Reserve (Fed) is likely to reduce capital inflows into emerging market (EM) economies. Emerging Europe is particularly vulnerable, thanks to the additional risks posed by the reduction of asset purchases by the ECB. Corporate bonds are most at risk because of the rapid compression in spreads on sub-investment grade debt, at their lowest levels since the financial crisis. Impacts Hawkish signals from central banks and US tax cuts are taking the benchmark ten-year US Treasury yield to its highest level since mid-March. However, dollar weakness will ease some of the strain on EM currencies and local bonds. With low core euro-area inflation reducing pressure to end QE, the ECB is unlikely to raise interest rates before 2019.

ECB's QE will buoy EM bond markets

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Content Type ◽  
Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

US rates may rise but economic risks are rising faster

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Sovereign Debt ◽  
Emerging Market ◽  
Content Type ◽  
Political Risks ◽  
Bond Yield ◽  
Treasury Bond ◽  
The Face ◽  
Equity Index

Subject Global equity market trends. Significance The four main US stock market indices began March at record highs, including the benchmark S&P 500 index at 2,400. Driven by expectations of stimulative and pro-business policies under the new US administration, equity markets are flying in the face of signals from the Federal Reserve (Fed) that interest rates will rise three times this year. The probability of a hike at the Fed’s March 14-15 meeting has risen above 80% on growing price pressures and stronger economic data, buoyed by hawkish comments from several Fed governors, including those who were previously dovish. Impacts Despite the post-election US bond market sell-off, around one-third of the stock of euro-area sovereign debt remains negative yielding. The gap between the two-year US Treasury bond yield and its German equivalent has widened to a record, a sign of rising monetary divergence. The euro lost 2% against the dollar in February as political risks escalated in the euro-area, centred around the French election. The emerging market MSCI equity index is 8.6% up this year, after losing 4.5% from November 9 to end-2016, a sign of higher confidence.

China and 'Grexit' risks weigh on EMs globally

2015 ◽  
Keyword(s):  
Stock Market ◽  
Euro Area ◽  
Emerging Market ◽  
Listed Companies ◽  
Equity Market ◽  
Foreign Investors ◽  
Content Type ◽  
Emergency Measures

Significance This month, 3 trillion dollars had been wiped off the value of all listed companies since a seven-year high on June 12, undermining confidence in the government's ability to steer the market. These developments along with the lingering risk of a Greek exit ('Grexit') from the euro-area, despite the provisional agreement reached on July 12, are taking a toll on emerging market (EM) asssets more broadly. Impacts The emergency measures aimed at stemming the sell-off in Chinese equities will help stabilise the stock market. Foreign investors' exposure to China's retail-based equity market is likely to remain limited. The renewed Brent crude price fall, down 14.2% since early May, will pressure oil exporters' currencies while benefiting oil importers.

Russian stock market is unlikely to repeat 2019 gains

2020 ◽  
Keyword(s):  
Stock Market ◽  
Interest Rates ◽  
Stock Exchange ◽  
Emerging Market ◽  
Oil Prices ◽  
Output Growth ◽  
Private Firm ◽  
Annual Growth ◽  
Content Type ◽  
Russian Stock Market

Subject The Russian stock market. Significance The Russian stock market offered high returns last year, as the Moscow stock exchange posted the highest annual growth of any of its emerging-market peers. The momentum carried over into January and the market reacted positively to a change in government, but the spread of the new coronavirus hit global oil prices. Impacts Low and declining Russian interest rates will encourage further investment inflows into equities. New IPO issuance will improve large firms' financial firepower. Output growth by Novatek should keep it in top position as Russia's most valuable private firm.

ECB may spark rate rises in Central-Eastern Europe

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Eastern Europe ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Market Sentiment ◽  
Central Eastern Europe ◽  
The Us ◽  
Equity Funds ◽  
Central Eastern

Significance Inflation rates are rising sharply across Central-Eastern Europe (CEE), mainly thanks to a recovery in commodity prices. A flurry of stronger-than-expected economic data is fuelling speculation in financial markets about the timing of increases in interest rates across the CEE region. Forward markets are already pricing in rate hikes in Romania and Poland within the next twelve months. Impacts Traders are now expecting the US Federal Reserve to achieve its goal of hiking interest rates three times this year. Emerging-market bond and equity funds are enjoying a surge in inflows, market sentiment having improved sharply after the US election. Mounting uncertainty regarding France’s presidential election next month is having a negligible impact on euro-area government bond markets.

Pressure rises on Hungary’s central bank to hike rates

2018 ◽  
Keyword(s):  
Central Europe ◽  
Euro Area ◽  
Emerging Market ◽  
Central Banks ◽  
Monetary Policies ◽  
Content Type ◽  
Services Sector ◽  
Financial Conditions ◽  
Bond Funds ◽  
Trade War

Significance The long-anticipated change in ECB policy is contributing to the recent tightening in financial conditions. The credibility of central banks in Central Europe (CE), where monetary policies are closely aligned with those of the ECB, is being tested. Impacts The euro-area economy will decelerate, judging by a flash PMI survey, as an export-led slowdown broadens out to the services sector. The Fed is on track to raise rates for the fourth time this year in December, despite a severe stock market sell-off and trade war fears. Tighter conditions could further reduce this year’s weaker inflows into emerging market equity and bond funds, about one-fifth down on 2017.

Investors may be underpricing more US Fed tightening

2019 ◽  
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Federal Reserve ◽  
Economic Activity ◽  
Emerging Market ◽  
Oil Price ◽  
Content Type ◽  
The Us ◽  
Equity Funds ◽  
Global Growth

Subject Financial markets. Significance The US stock market has rallied by 11.8% this year, buoyed by the US Federal Reserve (Fed) executing a dovish policy reversal in late January. Slower global growth prompted the turnaround, but at the same time, US economic activity still has momentum. Reflecting the uncertainty, a week ago futures investors saw a 20.0% chance of the Fed's next move being a rate cut and a 3.5% chance of a hike by January 2020. Expectations have since shifted, to a 7.0% chance of a cut and a 6.9% chance of a hike, respectively. Impacts The dollar is 1% higher since the Fed turnaround at end-January; much larger concerns about Europe than US activity will keep it rising. Emerging market (EM) bond and equity funds are attracting consistently high inflows, but sharply lower Chinese growth would be contagious. The Brent oil price has risen more than 20% this year, but weaker global growth will limit further gains.

Central Europe's slow rate rises will aim at growth

2021 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Slow Rate ◽  
Emerging Market ◽  
Central Banks ◽  
Content Type ◽  
The Us ◽  
Equity Funds ◽  
Us Dollar ◽  
The Eu

Significance The MNB’s first rate rise in a decade responds to headline inflation rising to the highest rate in the EU. The US Federal Reserve (Fed) decision to bring forward raising interest rates to 2023 is putting emerging market (EM) assets under increasing strain and heaping pressure on Central Europe’s central banks to begin tightening. Impacts Capital markets’ ‘hunt for yield’ will bolster EM bond and equity funds despite concerns about the Fed’s withdrawal of stimulus. The vast majority of investors are behaving as if the current surge in inflation will prove transitory. A sharp deterioration in sentiment may follow if price pressures last longer than expected. Brent crude’s rise to its highest level since October 2018, despite the recent rally in the US dollar, will fuel inflationary pressures.

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