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GLOBAL & REGIONAL DAILY (Friday, 9 August 2019)

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GLOBAL & REGIONAL DAILY (Friday, 9 August 2019)


August 9, 2019

Global markets

Shrugging off Wall Street’s rally overnight, the majority of global equity indices traded in the red on Friday, as the White House is reportedly delaying a decision about licenses for US firms to restart business with Huawei after China announced that it would stop purchasing US farming goods. Renewed US/China trade jitters weighed on risk appetite, with the Japanese yen strengthening as much as 0.4% against the US dollar near a seven-month high of 105.70 yen in early European trade and spot gold trading near a more than six-year high of $1.510 an ounce hit on Wednesday. Elsewhere, the British pound fell at a two-year low against the euro overnight, following news that PM Boris Johnson is preparing to hold an election after the Oct. 31 deadline if he loses a vote of confidence. In the government bond markets, the big mover were BTPs, with the 10yr respective yield rising 23bps to 1.769% at the time of writing, reporting its biggest daily increase since September, after Italian Deputy PM Matteo Salvini confirmed that his Northern League party wants early elections and will seek to dissolve the government.


According to ELSTAT’s monthly LFS, the unemployment rate (sa) declined to 17.2% of the labour force in May-19 from 17.4% and 19.4% in Apr-19 and May-18 respectively. May’s-19 value corresponds to an 8-year low with the total decline relative to the historical high of Sep-13 standing at 10.6pps. Moreover, the drop of the unemployment rate in May-19 was accompanied by a decline of the unemployed and by an increase of the employed by -11.7YoY% (-108.1YoY  k persons) and 2.1YoY% (+82.0YoY  k persons) respectively. As a result, the labour force declined by -0.5 YoY% (-26.1 YoY k persons). Finally, the increase of employment in Apr-May-19 was at 2.4YoY%, marginally below its respective value in 2019Q1 (2.5YoY%). Hence, employment’s component will be the workhorse of growth in 2019Q2.


Serbia: At its regular MPC meeting yesterday, the National Bank of Serbia (NBS) cut interest rates by 25bps from 2.75% to 2.50%, which is the lowest level in the inflation targeting regime of the Central Bank. Following July’s 25bps cut, this is the second consecutive policy rate cut. The move was not expected by the vast majority in the Bloomberg survey (only 2 out of 24 analysts predicted a rate cut). In the statement released thereafter, the NBS ground its decision on the subdued domestic inflation environment and well-anchored inflation expectations, the dovish stance of the major central banks worldwide plus the need to provide additional support to credit and economic growth.

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