Varchev Finance – Next week in one post 26-30.08.2019

A new tense week in the stock markets is coming to an end. After relatively good previous days for the indices, the movements on Friday became sharp and unforgivable, with the main stock indices registering atrocious losses, heading for their 200 periodic charts once again. Of course, on the front line again is Trump and his trade war in the United States, which threatens a serious slowdown in economic growth around the world. The last of these is that Trump is considering a new 25% tariff on his opponents, ordering US companies to look for alternatives to China instead of manufacturing and expanding their business horizons. This is definitely a major blow to risky assets and supports strong hedging instruments, with gold, yen and francs enjoying these developments.

During the new week, trade rhetoric will definitely remain at the forefront, with this eye-to-eye game seeming to appeal to the governing on both sides. No matter who gives way first, the global economy will suffer, and even in Germany right now they are underscoring the dangers of a recession. The bloc’s economy is growing at a slow pace in the third quarter of the year The first signals of a decline in the labor market are observed The economic outlook in Germany remains unclear and hangs only on exports. Economic activity may further contract in the summer due to low industrial activity. It is not clear whether exports will remain at a level before the domestic economy becomes more exposed to external risks Given the current developments, a new economic contraction will not be surprising. As has been shared in the past weeks, the dichotomy of the German economy (production and service performance) will eventually fall, and the chances of a negative effect on other sectors will become noticeable every day.

As trade tensions escalate and economic indicators weaken, Wall Street expects more aggressive reductions in interest rates from the Federal Reserve, with at least one forecast predicting zero interest rates.

Economists are now reporting a probability of three cuts before the end of the year, together with multiple in 2020, until it becomes clear that the US central bank is ruling out the possibility of a recession. The expectation comes just as Goldman Sachs has announced it is reducing its GDP projection by 0.2 percentage points, and Bank of America Merrill Lynch said it sees an increasing chance of recession over the next 12 months.

Other street forecasts join in calls for a weakening of conditions that prompted the Fed to play a sharper betting knife than officials indicated at a July meeting, with the first rate cut of 11 years.

On Tuesday and Thursday, we also expect data on gross domestic product in Germany and the United States, respectively, which will give a clear indication of the slowdown in the global economy and the contraction of growth.

11:00 Germany – Ifo Business Climate
15:30 USA – Durable Goods Orders

09:00 Germany – Gross Domestic Product
17:00 USA – CB Consumer Confidence
23:30 USA – API Weekly Crude Oil Stock

09:00 Germany – Consumer Climate
17:30 USA – Crude Oil Inventories

10:55 Germany – Unemployment Rate
15:30 USA – Gross Domestic Product
17:00 USA – Pending Home Sales

02:30 Japan – Tokyo Core CPI
02:50 Japan – Industrial Production
12:00 Europe – CPI
15:30 Canada – Gross Domestic Product

 Trader Aleksandar Kumanov

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