Fear is back
On Thursday investors realized that the increases of last few days were only a correction of the panic sell-off in early August. Economic slowdown in the U.S., Europe and Asia is almost certain. The debt crisis in the euro area remains unresolved. U.S. administration is not willing to take further steps to reduce debt and deficit. What is more, despite the economic slowdown in the world, commodity prices remain high.
Yesterday Morgan Stanley cut its growth forecasts for the global economy. Investors were also disappointed by data from the U.S.: decrease of Philadelphia Fed index and lower than expected level of home sales on the secondary market. Moreover, Wall Street Journal wrote that the New York Fed is afraid of the negative impact the European debt crisis can have on the banking system in the U.S.
The mood on the markets, which can be illustrated by the scale of yesterday's sell-off, is very bad. Therefore, probably the second half of August will be as hot as the first one. Nevertheless, the slump similar to that in the years 2007-2009 is unlikely.
Safe heaven assets in the spotlight
Deteriorating sentiment in financial markets, sell-off in stock markets, and central banks’ policy strengthen the prices of precious metals (gold and silver). Prices of gold yesterday jumped to new historical record. Currently, they are near the level of 1853.18 USD. Just a week before the gold cost 1723.25 USD. The prospect of further declines in the stock market may help to push the prices even above 2000 USD level. However, the probability of the sharp correction is bigger than few months before.
Events to watch
The calendar is almost empty. That is why many investors are looking forward to the next week, when the leaders of central banks are to meet in Jackson Hole. Next week we will also learn of more macro data (i.e. final data on the GDP in the UK and the USA.
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Paweł Kordala |
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