money green

Where to hide capital?


Financial markets were on troubled waters, and the waves are not caused by one particular factor, but a small cause for concern. Allegations of excessive levels of the same relate to shares, as bonds, leaving cash as the final destination for capital flight. On FX stands out JPY weakness on speculation the Bank of Japan.


Brainard pigeon from the Fed on Monday had to close about a potential increase in interest rates next week, but it allowed for a short time to calm financial markets. It seems that the markets nazbieralo too many smaller reason to fear that the combined strength compress negative sentiment. The debate about the pace of interest rate hikes the Fed is more difficult when the last US macro data do not indicate the acceleration of recovery. The stock market has a problem with that, especially when the forecast corporate earnings from Wall Street recently are subject to negative revisions. The debt market suffers doubt the further rise in bond prices, as it weakens faith in the willingness and ability of central banks to further monetary expansion. Global growth requires fiscal support, but in this field continues to be quiet. Add to that the growing uncertainty about the outcome of the presidential elections in the US and get a dangerous cocktail.


These problems are not new, but, as I wrote on Monday, they become pressing issues until then, when they start to focus primary attention. In the face of growing nervousness becomes risky and hold shares and bonds, for sale is a threat to both markets. Companies selling safes can now count on increased demand, since cash aspires to be the main direction for the capital. On the FX risk currency out of fashion, so beware of strong withdrawal in those cases where the last increases were strongest (eg. NZD, NOK). EUR could be the greatest beneficiary of the changes, underlining its status as a defensive currencies in the absence of negative impulses from the ECB in the near future. USD could be threatened by fears about the recovery in the US and the extension of the Fed's passivity, but in the short term it saves rise in US Treasury bond yields.


JPY would be better in the face of increased risk aversion, if not for the press speculation about next week's meeting of the Bank of Japan. Yesterday agency Nikkei relied on sources, according to which the BoJ intends to cut interest rates and make it the main point of the revision of monetary policy. This morning Bloomberg reported that some representatives of the Bank further favor the extension of the asset purchase program. Plurality of opinion increases the chances that next week some form of monetary expansion will be communicated. On the other hand, the problems of working out a consensus does not preclude the lack of taking any action. For now, the market holds the first version and USD / JPY is the best of the week, though cautiously walk up to the prospect of sustainability of this movement.


Today, the calendar greatest interest should be accompanied by data from the UK labor market and the report of the Department of Energy. The market assumes stabilization of the unemployment rate to 4.9 percent. (Three-month average calculated to July), but in the face of poreferendalnego shock risks are on the side of a higher reading, if the company immediately began to suspend plans to increase employment. The data on stocks of crude oil will be important, as will the strong rebound from the previous record decline of 14.5 million barrels. Consensus implies an increase of 2.8 million barrels.