{"id":44302,"date":"2015-08-26T07:05:00","date_gmt":"2015-08-26T05:05:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/global-market-volatility-more-to-come-but-opportunities-too\/"},"modified":"2015-08-26T07:05:00","modified_gmt":"2015-08-26T05:05:00","slug":"global-market-volatility-more-to-come-but-opportunities-too","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/global-market-volatility-more-to-come-but-opportunities-too\/","title":{"rendered":"Global market volatility: more to come, but opportunities too"},"content":{"rendered":"<h2>A severe summer storm<\/h2>\n<ul>\n<li> In recent days, markets have taken fright, ostensibly due to fears over Chinese growth. There have been sharp drops in<br \/>\ndeveloped-market as well as emerging-market (EM) equity indices, along with commodity prices. The situation has been<br \/>\nworsened by the holiday season, reducing liquidity and turning a manageable correction into a real summer storm.<\/li>\n<\/ul>\n<ul>\n<li> China is the \u201cswing state\u201d in this shift to \u201crisk-off\u201d sentiment, with markets focusing most recently on poor manufacturing<br \/>\ndata. (Export data has also disappointed.) Our base-case scenario remains for a soft landing for the Chinese economy,<br \/>\nalthough with uneven data quality and many structural changes underway, it is difficult to make an accurate assessment<br \/>\nof the country\u2019s economic health.<\/li>\n<\/ul>\n<ul>\n<li> Emerging markets have suffered from China\u2019s woes, but we believe that this is not a repetition of the 1997-Asian crisis.<br \/>\nFocus instead on three of the four BRICs (Brazil, Russia, China but not India) and selected others, e.g. Turkey and<br \/>\nThailand. Emerging markets facing domestic political problems and\/or with high U.S. dollar-denominated debt burdens<br \/>\nmay be most at risk.<\/li>\n<\/ul>\n<ul>\n<li> The impact of recent events on the developed markets has so far not been primarily through trade (the traditional linkage)<br \/>\nbut through developed-market corporates with high emerging-markets exposure.<\/li>\n<\/ul>\n<ul>\n<li> We continue to believe that the U.S. Federal Reserve (Fed) will raise rates in 2015, either in September or December.<br \/>\nPostponement of a rate hike might give some short-term relief but there is a greater risk that markets will see it as a sign<br \/>\nthat things are going wrong with the global economy. Fed wording and guidance will be very important<\/li>\n<\/ul>\n<h2>Several more days of rain<\/h2>\n<p>We have long warned about the dangers of \u201cflash crashes\u201d and predicted at the start of the year that volatility was likely<br \/>\nthroughout 2015. We believe that the market correction could go on for several more days. Severe market moves have<br \/>\nalready triggered stop-loss type provisions, forcing some funds to sell holdings. But markets will take reassurance from<br \/>\nfurther strong U.S. or European data, although any improvement in Chinese data may initially be met with some skepticism.<br \/>\nChinese structural reforms will take time to have results but changes to Chinese monetary policy (e.g. cuts in the reserve<br \/>\nrequirements ratio) could have symbolic importance. As noted above, Fed communication is likely to be important.<\/p>\n<ul>\n<li> <strong>Equities:<\/strong> We believe it is likely that the immediate market reaction has been overdone and that there will be some<br \/>\nselective buying opportunities, although the complexity of the situation makes it difficult to predict a market bottom.<br \/>\nValuation levels for European equities have become attractive again in our view; a renewed appreciation of the U.S. dollar<br \/>\nwould be a positive for Eurozone companies. We remain on the sidelines with regards to EM equities, as this is the<br \/>\nmarket segment that will probably see the most cuts to earnings estimates in the coming weeks<\/li>\n<\/ul>\n<ul>\n<li> <strong>Fixed Income:<\/strong> Again, markets appear to have overreacted in some instances and our current view is to tactically<br \/>\nunderweight 10-year Bunds. On Eurozone periphery, we stay neutral. With regards EM sovereigns, we would stay on the<br \/>\nsidelines for now; there will be opportunities, but liquidity in the market is currently thin.<br \/>\n<quote>We are underweight on EM credit<br \/>\nas a whole due to the large weights of certain markets, but this asset class needs to be considered on a sectoral or<br \/>\ncountry basis, rather than by region. We stay neutral on developed-market investment-grade and high-yield debt.<\/quote><\/li>\n<\/ul>\n<ul>\n<li> <strong>Commodities: <\/strong> The slump in the oil price is bad for sentiment but, given that it is more of a supply issue than a demand<br \/>\nissue, it does not necessarily reflect poor gross-domestic-product (GDP) growth. The positive impact on consumers<br \/>\nremains important, in our view.<\/li>\n<\/ul>\n<ul>\n<li> <strong>FX:<\/strong> The euro\u2019s role as a funding currency means that it is likely to do well during periods of \u201crisk-off\u201d market sentiment.<br \/>\nHowever, as the situation stabilizes, we expect the long-term trend of U.S. dollar appreciation to resume.<\/li>\n<\/ul>\n<blockquote><p><strong>Bottom line:<\/strong> Expect further volatility, but the summer storm will pass.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>According to Deutsche AWM, markets appear to have overreacted in some instances and Deutsche AWM current view is to tactically<br \/>\nunderweight 10-year Bunds. On Eurozone periphery, Deutsche AWM stay neutral. With regards EM sovereigns, Deutsche AWM would stay on the<br \/>\nsidelines for now; there will be opportunities, but liquidity in the market is currently thin&#8230;<\/p>\n","protected":false},"author":1,"featured_media":44300,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1809,1655,1659,1657,1716,1651,2087,1706,2068],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44302"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=44302"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44302\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/44300"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=44302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=44302"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=44302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}