Daily Overview of Global Markets & the SEE Region (Wednesday, 8 May, 2019)
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: Taking their cue from Wall Street’s losses overnight, Asian bourses lost ground in today’s session and European equity markets opened lower, amid increased uncertainty over the outcome of the US/China trade talks. The Chinese delegation is still set to visit Washington for a new round of talks on Thursday and Friday, in an attempt to avoid a tariff increase in Chinese imports, scheduled to take effect at 12:01 a.m. on Friday New York time. Favored by increased US/China trade tensions, core government bonds gained momentum. The 10-yr Bund yield moved back into negative territory while yesterday’s downward revision in the EU Commission’s growth forecast for the Eurozone, had also had an impact. Turning to the EMU periphery sovereign bond markets, Italy underperformed, negatively affected by the EU Commission’s downward revision of GDP growth projection for 2019 from 0.2% to 0.1% and a projected deficit in 2020 above 3.0% of GDP. In FX markets, increased trade uncertainty continued to favor the JPY’s safe haven appeal while the EUR/USD was hovering around the 1.1200 handle in European trade at the time of writing, a tad higher from Tuesday’s close, after industrial production data from Germany showed a 0.5%MoM increase in March, the third rise in the last four months.
GREECE: According to the EC’s Spring forecast, real GDP growth rate in Greece is estimated to accelerate to 2.2% in 2019-2020 from 1.9% in 2018. The unemployment rate is projected to drop to 16.8% in 2020 (from 19.3% in 2018) and the inflation rate – based on the HICP – is estimated to remain constant at 0.8%. As is noted in the EC’s report, the aforementioned forecasts are dominated by downside risks (e.g. underexecution of public investment projects and a higher deceleration on exports’ growth).
SOUTH EASTERN EUROPE
CESEE MACRO DEVELOPMENTS: In the Spring 2019 European Economic forecast, released yesterday, the European Commission (EC) revised lower the projected GDP world economic growth forecast in 2019 to 3.2% YoY from 3.5% YoY previously in the Autumn forecast. Accordingly, the EU28 the economic growth forecast is now seen at 1.4% compared to 1.5% in the Winter interim forecast. The EC based its broadly lowered forecasts on substantial downside risks that remain in place, such as the uncertainty in the US China trade tensions, the possible imposition of US tariffs on cars and car parts imported from Europe, the possibility of a no deal Brexit and the political uncertainty that could follow in the wake of national or European elections. Approaching the CESEE region, GDP growth prospects remain robust in the CEE4 countries while in countries of our focus such as Bulgaria and Serbia, the GDP growth projection for 2019 was lowered with the waning foreign demand being the common denominator.
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