Bond yields dropped, Equities took a short-lived break, China devalues CNY, New Zealand cut rates
Issued by Labis Michalopoulos, CFA
3+9 minutes read report, 2+6 pages
Adding more risk off positions (i.e. short equities-CNY- AUD, long JPY ) to last week’s rallies is set to pay off. It’s worth celebrating that our readers were prepared to get ready for the risk-off mode that is prevailing, since 27 July. I keep favoring risk-off trades for one more week.
Individuals are taking breaks, as markets continue pricing risk in a never ending process. We were raised to live with inflation. We will realize that inflation is not a prerequisite for growth and we will start finding less analogies of the today’s macroeconomic global environment with the Japanese economy of the 80s . The beat goes on / the show must goes on / τα πάντα ρεί means that nothing stands the same, as the substance of the river changes, but it is still named a river.
Major events of last week:
- Italy is heading to snap elections. UK could have new elections within the next three months. Brexit talking will become an ongoing issue to address (like the repeated increase of the US debt ceiling), is my take.
- Japan-South Korea: Japan approved semiconductor exports towards South Korea.
- USA: The USA is pressuring Japan to join the security forces that patrol the strait of Hormuz
- China: China warned Australia, Japan and South Korea not to accept US missiles, revealed its intentions to stop importing crude from the USA and denied the participation of Chinese actors and films to the Taiwanese film awards. The aggressive devaluation of the CNY on Monday has been paused.
- Kashmir: India reclassified Jammu and Kashmir as two union territories, instead of a state.
- Protests: Protests in Hong Kong continue for the 10th weekend and 22 states have issued travel warnings (including the USA and Australia). Protests in Russia over disqualifying opposition candidates, for the 45 seat of Moscow City Duma, continue for the 5th weekend. Both facts reveal the limits of Chinese and Russian government. One could steer the attention to the undeniable unrest, or the shrinking number of protesters. Political will is under-expressed/understated, government control is not lost.
Major events of next week:
- OPEC’s monthly report on oil is scheduled to be released on Tuesday.
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