The ruble resumed its sharp fall after the price of oil and the currencies of emerging markets amid the flight of investors into defensive assets and sales on the stock exchanges around the world.
Dollar at 64,93 ruble at the close of trading on Tuesday to 18.10 GMT environment soared to 66,0850 ruble hit a new high in 5 months.
The jump rate – 1.7% per day – was a record since November last year. The Euro rose by 1.11 rubles – up to 73,5125 of the ruble.
The oil market on the eve of the recapture mark 60 dollars per barrel of Brent, dived almost 5% 61,08 of the dollar at the opening of trading futures on the North sea grade had fallen to 58.6 per dollar. Contracts for WTI lost even more – 4.8 percent to 54.39 USD per barrel.
Quotes of risky assets around the world came under the barrage of gloomy macrostatistics and got the “alarm” from the market of U.S. debt, says the chief economist of High Frequency Economics Carl Weinberg.
On Friday the yield curve of us bonds for the first time since 2008 was reversed at site 2 years – 10 years: interest rates on 2-year bonds exceeded the 10-year-olds (1,632% per year compared to 1.63%).
Over the last 50 years this situation has always signaled an upcoming recession in the U.S., like the Сredis Suisse strategist Jonathan Golub. Although scientific theories, strictly proving that the inverse form of the yield curve portends a crisis, there is no accumulated statistics is relentless: on average, since the inversion before the economic downturn took 22 months.
In normal situation on the debt market should be the opposite: the risks of investing in the long term above that, as a rule, forces creditors to pay more for borrowed financial resources, explains marcoeconomics motivated investment Director “Loko-invest” Cyril Tremasov.
The fact that interest rates on long-term bonds below short-term suggests that waning investment demand – business does not see opportunities for efficient investments, while the money remains in excess, which is characteristic of the late stage of the business cycle, he says.
Incoming news adds fuel to the fire, a gloomy mood, says Weinberg: industry of China in July rose from the minimum in 17 years rate (4.8%), in Germany in the second quarter, production fell by 5%, and the economy began to contract, the GDP lost 0.2%.
“Pessimism about the global economy intensifies,” says Marc Ostwald, global strategist at ADM Investor Services in London: investors are running in safe government bonds, which still offer positive returns, most often in long-term securities with higher returns to protect their money in the face of slowing global growth.
Not willing to risk capital away from emerging markets, from equities and credit markets – it reduces the resource availability for business, says chief economist at ING’s James Knightley.
Hopes for a truce in the trade war the U.S. and China, appeared yesterday, meanwhile, have been defeated, a rally on the stock exchanges on Tuesday turned into a “Bouncing dead cats”.
To 18.29 GMT the S&P500 fell by 2.18%, the Dow Jones – 2.22% and the Nasdaq by 2.43% after the U.S. Commerce Secretary Wilbur Ross announced that the United States to postpone until December the introduction of the 10 percent duties on $ 300 billion of Chinese imports did not lead to any reciprocal concessions.
Although further phone calls already scheduled and will take place in two weeks, the date of the next round of personal meetings until not assigned, said Ross.
The only hope for the markets is the start-up of printing presses in Europe and the United States. The ECB has already announced the issuance of free long-term loans for banks and is considering to resume asset purchases.
ABN Amro expects the purchase to the tune of 70 billion euros per month for nine months, Morgan Stanley expects QE to level from 45 to 60 billion euros a month for at least one year. According to Goldman Sachs, the ECB will spend a total of up to 300 billion euros.
As for the fed, the light on her plans may spill 22-24 August, when there will be an annual Symposium in Jackson hole, says Knightley of ING. In the meantime, the markets are screaming that the Central banks are late with incentives, summarizes Ostwald.