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Daily Overview of Global Markets & the SEE Region (Wednesday, 5 June, 2019)
HIGHLIGHTS
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: In a speech yesterday that focused on broader monetary policy issues, Fed Chair Jerome Powell dropped his standard reference to the Fed being “patient” on future rate moves, saying instead that policymakers are closely monitoring the implications of the trade war on the US economic outlook and will act “as appropriate” to sustain economic expansion. The above comments that followed St. Louis Fed President James Bullard’s remarks earlier this week that lower short-term rates “may be warranted soon” on the view that inflation and inflation expectations remain below target and the economy may slow sharper than expected due to ongoing trade tensions, provided further support to the prevailing view for lower Fed interest rates in the coming months. Fed fund futures are currently assigning a probability of around 93% for a 25bps rate cut by September 2019 compared to c. 26% a month earlier, before the latest escalation in the US/China trade war. In reaction to the Fed Chair’s dovish comments, Asian bourses gained in today’s session and European equity markets opened slightly higher, while in FX markets, the USD came under pressure with the DXY marking a seven-week low of 96.961 earlier today. Meanwhile, the 10-yr Bund yield marked a fresh record low of -0.229% in reaction to the flash Euro area HICP figures for May released yesterday, which showed a bigger than expected drop in both headline and core CPI to 1.2%YoY and 0.8%YoY, respectively.
GREECE: According to ELSTAT’s 2019Q1 national accounts, the annual real GDP growth in Greece decelerated to 1.3 YoY% in 2019Q1 from 1.5 YoY% in the former quarter. On a quarterly basis, growth was positive at 0.2 QoQ% in 2019Q1 from -0.1 QoQ% in 2018Q4. Greece’s aggregate economic performance in 2019Q1 raises concerns over the accomplishment of the Government’s target for a FY-2019 real GDP growth rate of 2.3% (the same holds for the official forecasts of the EC at 2.2% and the IMF at 2.4%).
SOUTH EASTERN EUROPE
SERBIA: According to data released yesterday by the Ministry of Finance, the central government debt increased by EUR27.9mn or 0.1% MoM to EUR 23.4bn in April. The public debt accounted for 51.1% of GDP, down from 53.8% of GDP in the end of 2018 while the budget run a RSD10.3bn deficit compared to a RSD 0.1bn surplus YoY in the same month a year earlier. The 2019 budget envisions a central government budget deficit of RSD22.9bn (0.4% of projected GDP) while the general government budget targets towards a deficit of RSD 28.7bn (0.5% of projected GDP).
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