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Daily Overview of Global Markets & the SEE Region (Thursday, 18 July, 2019)

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Daily Overview of Global Markets & the SEE Region (Thursday, 18 July, 2019)

HIGHLIGHTS

WORLD ECONOMIC & MARKET DEVELOPMENTS

GLOBAL MARKETS:  Market participants returned to risk-off mode today with Asian bourses performing poorly and European equity markets opening lower amid fears over a further escalation in the US/China trade dispute. Market concerns that the prolonged US/China trade dispute could hurt corporate earnings and disappointing data yesterday from both sides of the Atlantic, have also weighed on market sentiment towards risky assets. New car registrations in the EU resumed their downtrend in June falling by 7.8%YoY, the biggest decline this year and the ninth drop in the last ten months, while US housing starts and building permits data for June disappointed, suggesting that the housing market continues to slow down despite declining mortgage rates. Against this background, US Treasuries gained and European government bonds followed suit with periphery markets outperforming Bunds. In FX markets, the USD weakened on lower UST yields.

GREECE: In an interview at local TV station ERT, ESM Managing Director Klaus Regling stated that at the moment changing the agreed fiscal targets is not relevant and that both the Prime Minister and the Finance Minister confirmed that for this and the next year the agreed fiscal targets are not put into question. The European institutions will return to Athens in September to analyse policy measures in detail. In other news, according to press, cabinet members are to informally meet representatives of Greece’s creditors (EC, ESM, ECB and IMF) today.

SOUTH EASTERN EUROPE

CESEE MACRO DEVELOPMENTS: At a meeting in Belgrade yesterday with Serbian Prime Minister, Mrs. Ana Brnabic, Alfonso Garcia Mora, Director for Finance, Competitiveness and Innovation at the World Bank (WB), said that Serbia needs to continue with macroeconomic reforms and create a more dominant private sector. In turn, the Prime Minister said that the government will continue investing in education and development of modern economy through the digitalization channel and confirmed the government’s forecast for a 3.5% GDP growth rate in 2019, which matches the forecast of the WB. Elsewhere in the region, while data for Serbia’s and Bulgaria’s current account (CA) in May are due tomorrow, respective preliminary data for Romania was published by the central bank earlier in the week. Despite the fact that the CA deficit may have widened by 34.6% YoY to EUR 1.21bn in May, the growth rate moderated significantly from ca 94% YoY in April, remaining mostly fueled by the merchandise trade deficit.

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