Take Five: World markets themes for the week ahead
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[September 23, 2017]
LONDON (Reuters) - Following
are five big themes likely to dominate thinking of investors and traders
in the coming week and the Reuters stories related to them.
1/ STRONG QUARTER? NOT HALF
It's the end of the quarter. And what a remarkable quarter it has been.
Wall Street and world stocks have climbed to record high after record
high, chalking up the longest streak of quarterly gains in two decades.
At the same time, volatility has remained anchored at the lowest levels
in decades. By some measures, the last few days have been the calmest in
U.S. stock market history. Bond markets have also been well behaved,
considering many of the world's major central banks are preparing to
shrink their balance sheets. There's been a little more volatility in
FX, with the euro breaking above $1.20 and sterling recovering sharply
this month. What does that mean for next week? Potentially some
profit-taking and position squaring as investors lock in what they got
during the quarter. If that's the case, some weakness in stocks, bonds,
and the euro.
![](http://archives.lincolndailynews.com/2016/Aug/26/images/ads/current/ldn_medical_directory_small_2016.png)
Selected stock markets and currencies in Q317: http://reut.rs/2jQPEG1
2/ ON A ROLL
Sterling has, with a week to go to the end of the third quarter, put in
its best performance against the dollar since the second quarter of
2015. The week ending Sept. 9, when the Bank of England began talking
about raising interest rates in what would be its first hike in a
decade, was the pound's best in eight years. Recent days were dominated
by anticipation of a major speech on Brexit from UK Prime Minister
Theresa May. In the event, it did not break much new ground for markets
and the pound was slightly lower on the day, raising questions over
where the impetus for another move higher in sterling will come from.
Sterling and gilt yields: http://reut.rs/2xW0QqU
3/ SPARE A ROUBLE?
After B&N Bank, Russia's 12th biggest lender, became the latest domino
to tumble in the country's banking sector, markets will be on alert for
hints of more trouble. B&N's bailout request came three weeks after the
rescue of Otkritie Bank while earlier, licences were revoked at Yugra
bank and Tatfondbank. Investors reckon more banks will fail, stemming
from Western sanctions and unbridled expansion before that. That means
Russian financials' shares, down 12 percent this year,may see little
respite <.MICEXFNL> (Broader Russian shares have lost 8 percent). Bonds
of afflicted banks have fallen heavily. As a result, private banks'
shares and bonds may stay under pressure <PSBR.MM> <CBOM.MM>. There is
also the question of expense - bailouts will be financed through a
special fund but costs could be huge, with Otkritie's capital deficit
almost $7 billion and a $6 billion hole likely in B&N's balance sheet.
That's on top of the $30 billion deposit insurance that's already been
paid to depositors of failed banks. The central bank will sell bonds and
hold deposit auctions to finance the rescue. But if the sums are
massive, it could fuel inflation - a setback in Russia's battle against
price growth. That would be bad news for the rouble and Russia's local
bonds, which have so far easily withstood the bank malaise.
[to top of second column] |
![](../images/092317pics/busine77.jpg)
Arrangement of various world currencies including Chinese Yuan, US
Dollar, Euro, British Pound, in this picture illustration taken
January 25, 2011. REUTERS/Kacper Pempel/Illustration/File Photo
![](http://archives.lincolndailynews.com/2017/Sep/23/images/ads/current/cca_lda_BACKTOSCHOOL_2017.png)
Russian bank shares, bonds: http://reut.rs/2jQ8ihh
4/ FOR REAL
It used to be that when the Federal Reserve raised rates, Asia's emerging
economies would follow. With the U.S. central bank announcing the final stage of
its exit from unconventional policies, policymakers are watching for any
evidence of risk aversion. For the moment, though, there are no signs of
outflows from the region and there is little pressure to compete for funds with
higher rates. Low inflation is a global pandemic and that keeps real interest
rates in Asia attractive. In fact, India and Indonesia cut rates in August and
could even have room to cut again – perhaps even joined by Thailand. The Thai
central bank holds a policy meeting on Sept. 27
Little pressure on Asia to follow Fed's rate hikes: http://reut.rs/2xWrlN8
5/ IF...
Equifax and bitcoin have been much on investors' minds this month. Fallout from
Equifax’s massive data breach, which compromised the social security numbers and
other personal information of as many as 143 million Americans, wiped out more
than one-third of the company’s market value, sending its shares to a more than
2-1/2-year low. Meanwhile, the price of a bitcoin declined to about $3,000 from
a September peak of about $5,100, as Chinese authorities said they would ban
trading of the cryptocurrency in their country. Bitcoin has bounced back above
$4,000, but Equifax shares, which fell as low as $89.59 from $142.72 before the
scandal broke, have rebounded only to about $96. If Equifax shares were priced
in bitcoin, they would be worth just 2 cents each. So, as investors enter the
final quarter of the year, will Equifax or bitcoin be at the top of managers
buy-and-hold list?
![](http://archives.lincolndailynews.com/2017/Sep/23/images/ads/current/rohlfs_lda_072017.png)
![](http://archives.lincolndailynews.com/2016/Aug/26/images/ads/current/ldn_medical_directory_small_2016.png)
Equifax versus Bitcoin: http://reut.rs/2xUixaD
(Compiled by Nigel Stephenson; Editing by Toby Chopra)
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