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Markets see a slight calm: how long will this last?
With the surprise weakening of the yuan on Monday, the market went into shock and investors sought safer investments. Export data from China released on Thursday however, gave investors a slight sense of relief and stocks saw a tentative recovery. The fears of a recession are still up in the air, as the end of the ongoing tensions are unknown.
Encouraging export data. Chinese exports were expected to see a decline of about 2%, but data from July shows that exports rose about 3% from a year earlier, which came as a pleasant surprise to investors.
Other exchanges encouraging. With investors seeking out other investments outside of the U.S. and China, the pan-European Euro STOXX, Germany’s DAX, Britain’s FTSE and France’s CAC all rose in Thursday. Additionally, MSCI’s world stocks index rose slightly as well.
Resolution may be soon. Some investors feel that the U.S. and China may reach an agreement sometime soon, due to the increased number of investors putting their money elsewhere. Gold rose above $1,500, which hasn’t happened since 2013.
Fear of a recession. The ongoing trade conflict between the U.S. and China still leaves investors unsettled. Since the U.S. and China are the two largest economies in the world, ongoing conflict can start a global recession. Recession indicators for the U.S. have hit their highest levels since early 2007.
Rates falling. Seven to ten year bonds hit their lowest rates ever, dropping to 1.44% worldwide. U.S. 30-year bond yields also fell to about 2.12%, coming close to their record low from 2016. Ten year yields also dropped.
Increased risk of fallout. Although some feel that a resolution may be on the horizon, many other investors think that the recent events increased the risk of a fallout between the two nations entirely.
What’s next? The surprisingly positive export data from China brought a sense of relief for many investors, steadying the yuan. However, a large number of investors feel that a recession is inevitable due to the rise in tensions and the recession indicators pointing in that direction. The outcome is still currently unknown, so investors worldwide will have to sit back and wait for what’s to come next.
https://www.reuters.com/article/us-global-markets/markets-find-a-floor-as-chinese-data-soothe-nerves-idUSKCN1UY02C, Tommy Wilkes August 7th, 2019