Italy was once again in the limelight – this time because the European Commission rejected its 2019 budget. Yet Italian sovereign yields declined over the week, which leads us to believe that investors had expected this outcome. We don’t think Italy will have to pay a fine for violating the EU’s budget rules.
Angela Merkel suffered more heavy losses in regional elections in Hes-se, another sign that her govern-ment is crumbling. Just like in the Bavaria elections, her party lost ground to more extremist parties such as the Greens and the AfD. Merkel reacted immediately and stepped down as leader of her party. She also announced that she would leave politics in 2021, creating an uncertain future for Germany.
Unsurprisingly, Jair Bolsonaro won Brazil’s presidential election. Despite his controversial statements and his rather provocative personality, the Brazilian stock market reacted well to his victory and his pro-business stance. The country’s Bovespa index continued to gain ground, up more than 22% since its June low.
Will we soon run out of reasons to sell equities?
A little more patience...
To go deeper
China’s structural decline in economic growth continued last month, with GDP expanding 6.2% on an annualised basis, in line with expectations. However, short-term indicators already show the effects of the government’s stimulus programme – industrial production, retail sales and capital spending all came in above the June consensus estimates...
A major change of course is taking place, and policy normalisation is now out-dated. In light of the potential slump in international trade and sharp decline in inflationary expectations, the Fed and the ECB have already announced rate cuts in the second half of the year.
The G20 summit ended with another truce in the spiralling trade war: President Trump withdrew his threat to impose tariffs on the remaining USD 300bn in Chinese imports and agreed to resume trade talks. However, he did not backpedal on the tariff hikes introduced in early May, or on setting a deadline for reaching a deal...