Bond market crash is not the topmost concern of global investors. According to a survey by London-based investment bank Natixis, the ongoing trade war has replaced geopolitical risk as the biggest concern for global financial market investors
- Among other concerns, China’s risk perception decreased and Italian risk gained momentum. Uncertainty over oil remains subdued, while US recession and ECB tapering fall outside global investors’ radar. Natixis said an escalation of the trade conflict to a trade war could result in a global slowdown
- Nigam Arora of Arora Report said in the last 64 years, the US has seen 9 recessions and each time US interest rates were either the highest or rising fast. The scenario now is no different, with the US raising rates and projecting a sharper rise ahead
HSBC: How is China expected to respond? Retaliating with 'equal magnitude' in both 'quantitative and qualitative' forms, China is expected to deepen trade ties with Europe, Asia and other emerging markets. More spending to stimulate domestic growth.
Oil price around $84
After the survey, Natxis said, "We forecast Brent crude oil prices averaging $84/barrel in the second half of 2018, with prices set to appreciate for another year between 2018 and 2019."
Reduced fear of recession in the US in near term
The trade war may have formally commenced with the imposition on July 6 of the first set of tariffs. But stock markets dodged a bullet with last Friday’s US wage and job data. Wage growth did not accelerate, reviving Goldilocks' hopes. The unemployment rate rose from 3.8% to 4% due to increase in the participation rate. This has reminded investors that America is not at full employment, reducing fears of overheating (rise in jobseekers has increased unemployment, which has raised prospects to generate more jobs and hence more growth hopes)