Home Banking Daily Overview of Global Markets & the SEE Region (Wednesday, August 1, 2018)

Daily Overview of Global Markets & the SEE Region (Wednesday, August 1, 2018)

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GLOBAL MARKETS: Wall Street closed in the red overnight for the third consecutive session as technology companies were further pressured, while Asian equity markets traded mixed on Tuesday after weaker-than-expected corporate profits announcements and China’s July PMI indices. Elsewhere, the Bank of Japan (BoJ) maintained its monetary policy unchanged and left its zero yield target and short-term interest rate target at minus 0.1% by a majority vote of 7-2, as broadly expected. The central bank has introduced forward guidance, while making its massive stimulus programme more flexible by allowing larger movement in the 10-yr JGB yield and shifting ETF purchases from tracking the Nikkei to the TOPIX. In response, 10-yr Japanese government yields fell 5bps to 0.053% in European trade on Tuesday, pulling away from a 11/2 high of  0.123% hit in Asian trade. In FX markets, the USD/JPY hit a one-week high of 111.46 in European trade on Tuesday after BoJ decision, gaining roughly 0.4% on the day at the time of writing. Wall Street firmed overnight breaking a three-day losing streak amid a rebound in technology stocks and news reports for a possible resumption of trade talks between the US and China. On the trade front, the US administration is reportedly considering a plan to raise the 10% tariff on $200bn of imported Chinese goods to 25%. In response, the US dollar added 0.6% against the yuan to 6.8462, within distance from a one-year high of 6.8569 hit last Friday. Turning to the government bond market, the Japanese 10-yr bond yield hit an 11/2 month high of 0.132% marking its biggest one-day rise in about two years, following the BoJ’s commitment to allow more flexibility in the 10-yr Japanese government bond (JGB) yield. The uptrend in JGBs yields pushed core euro zone sovereign bond yields higher, with the 10-yr Bund yield surging to an 11/2 month high of 0.47% in European trade at the time of writing. Investors’ focus should centre on the FOMC meeting outcome this evening, although no change in policy is anticipated, with the market almost fully priced for two 25bp rate hikes in September and December. On the macro data front, the final July manuf PMIs in the Euro area are due later in the day, while, in the US, the July ADP empl change and the July ISM manuf should be also worth watching.

GREECE: The IMF in its Article IV Consultation on Greece, called for the continuation of the reform effort in all fronts in order to boost productivity and urged towards the avoidance of backtracking on agreed reforms and already pre-legislated fiscal measures. The IMF recognized the sustainability of gross public debt in the medium term but expressed serious doubts over its long term sustainability.


CYPRUS: Confidence improved in July, rebounding back from multi-month lows recorded in June.

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