Daily Overview of Global Markets & the SEE Region (Wednesday, 15 May, 2019)
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: Market sentiment towards risk assets improved on Wednesday as reflected in Asian bourses’ rebound from yesterday’s 3½-month lows, supported by increased optimism that a US/China trade deal could be finally reached. Despite equity markets’ improved performance, core government bonds remained well supported in early European trade. Turning to the EMU periphery sovereign bonds, Italy underperformed on the back of market worries over renewed tensions between the EU Commission and the Italian government. Pressures were more pronounced against Italy’s shorter-dated paper, with the 2-yr yield hitting a year-to-day peak close to 0.82%. In FX markets, the EUR/USD continued to consolidate around the 1.1200 handle, while the GBP was under pressure across the board on the back of increased political uncertainty ahead of the European Parliament elections on 23 May, as recent opinion polls suggest the ruling Conservative party will probably face a heavy defeat.
GREECE: In an interview yesterday, the Greek Finance Minister Euclid Tsakalotos stated that the draft 2020 Budget will be submitted to the European Commission on 15 September and will incorporate two scenarios: one without and one with policy changes, namely the annulment of the reduction of the tax-free threshold – effective on 1 January 2020 – and other tax measures.
SOUTH EASTERN EUROPE
CESEE MACRO & MARKET DEVELOPMENTS: The majority of emerging market assets on Thursday are holding back from further losses throughout the previous week and yesterday, despite the disappointing soft data released yesterday from China. Presumably, emerging markets losses are contained, despite the unfavorable data from China, amid expectations over a positive outcome in the US – China dispute by June 20, when US President Trump and China’s Xi Jing Ping will meet on the sidelines on the G20 meeting in Osaka. Elsewhere in the region, Q1 2019 GDP flash estimates for Bulgaria, the Czech Republic, Hungary, Romania and Poland are due later today. Although most of the prints are expected to show some slowdown, GDP growth rates in the CESEE region still remain well above those of the Eurozone economies.
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