60 variables, 31 charts, and one dashboard to capture gyrating global macro risks
- Still, global risks sentiments are not as poor as they were in December
- Among indicators that are still in considerable better territory are:
- financial conditions index, global shipping rates, measures of Eurozone risk, currency market vols..
- …USD funding conditions, and credit spreads
From improving to deterioration in a week
Global dash to safety has accelerated. Every needle in our global macro risk dashboard have moved in that direction. Bond markets are rallying hard, expressing expectations of policy rates to be cut and kept low for long. Wednesday’s triple rate cuts by the central banks of India, New Zealand, and Thailand, all accompanied by more-dovish-than-expected signals, further underscored this trend.
As yield curves flattened or inverted, credit spreads widened, equities sold off, currency volatility spiked, gold jumped, and energy and industrial metals softened. Trade war is of paramount concern, as is ongoing slowdown in China and Europe. If US data begin to soften beyond manufacturing, recession alarm bells will ring loud.
Despite the dramatic developments of the past week, global risk sentiments are still not as poor as they were in December. As seen in the charts of this publication, financial conditions index, global shipping rates, measures of Eurozone risk, currency market vols, USD funding conditions, and credit spreads saw far worse outturns late last year. With central banks on the defensive, large scale China fiscal stimulus in place, US domestic demand still robust, and no sign of credit crunch worldwide, all that is needed to revived sentiments is for saner heads to prevail in the US-China trade war sphere. All it took was a tweet to break the markets last week, underscoring the fragility of sentiments. The danger is that a mitigating tweet may well be too little and too late to stem the damage already done to global investment and growth.
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