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- GDP in UK and interest rates related fears will dominate the market in the new week
GDP in UK and interest rates related fears will dominate the market in the new week
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Loading...A seemingly calm new trading week. Significant economic news is missing from the trader's calendar. But that does not mean that the week will be without events. Something very important has happened over the past few days and it has certainly left its mark on stock exchanges all over the world. Return on 10-year government securities reached its highest value since 2011, sliding over 3.2%. But this is not the most important thing. It is not so important that the yield is 3.2%. What matters is the rhythm of promotion. Movement of 10 basis points and more in 2 days is a different story. The tempo is important and deserves observation.
In the new week, I expect the stocks that are of direct significance for these events to continue to decline - such as Procter & Gamble for example. Banking companies on the other hand are expected to have a strong week - J.P.Morgan Chase and Bank of America are backed by high interest rates.
With such rapid movements in such a short time, it is normal for the market to become insecure.
Another interesting factor is that because of high interest rates - strong data on the economy are turning bad. It's not surprising. What is surprising is that it took so much time to develop. Some investors are waiting for years for high interest rates. What is the reason for the rising yield on government securities? 1. Very strong economic data in recent weeks has accumulated, but the ISM service sector report for September has pushed yields on 10-year bonds from 3.08% to 3.18%. August's factory orders data showed the highest increase for the past 11 years. 2. The Fed signaled for higher interest rates. President Jerome Powell recently commented, "current monetary policy is no longer fit for the conditions." 3. Commercial fears are falling. To some extent, higher yields already have an impact on stocks. The sectors that are most sensitive to high interest rates are generally down in the last month, although the broader market is growing. Just how much more profitability will be raised is an open question. There is no way we know, but over the past few days, volumes of widely traded ETFs, such as the iShares 7-10 year Treasury Bond ETF (IEF) and iShares 20+ Year Treasury Bond ETF (TLT), climbed to their highest levels of months . Optional activity is also increased. Not surprising. When risk-free assets such as bonds make a lot of movement, as we have noticed, traders are standing and recording. Another ETF that is worth monitoring is iShares iBoxx Investment Grade Corporate Bond ETF (LQD), a basket of corporate bonds that is at its lowest level since early 2016.
Yet the new week will not be completely empty from economic data. On Wednesday, traders will be looking for the important Gross Domestic Product report in the UK as the news will tell how the island's economy is tackling with the upcoming Brexit. A day later on Thursday, investors will focus their attention on the ECB's monetary policy report, which can hide many surprises. We may receive information about the central bank's plans for the program for quantitative easing, as well as signals for future interest rate interventions and the return of their neutrality after years of intervention.
The economic news that will drive the markets during the new week 08.10 - 12.10.2018
Monday
09:00 Germany - Industrial Production
Tuesday
15:15 Canada - Housing Starts
Wednesday
00:45 New Zealand - Electronic Card Retail Sales
11:30 UK - Gross Domestic Product
15:30 USA - PPI
Thursday
14:30 Europe - ECB Publishes Account of Monetary Policy Meeting
15:30 USA - Core CPI
18:00 USA - Crude Oil Inventories
Friday
09:00 Germany - CPI
12:00 Europe - Industrial Production
Trader Aleksandar Kumanov Read more:
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