bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Sunday 25.09.2016 | Name days: Rauls, Rodrigo

Economist: Q3 in financial markets to continue in shadow of Brexit

FaceBook
Twitter
Draugiem
print
(+1 of 1)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

In financial markets, uncertainty looms large over the third quarter of 2016 and beyond, but if reforms and improvements are put in place, the risks also could bring positive change, Saxo Bank economist predicted.

Steen Jakobsen, Saxo Bank’s Chief Economist and CIO, evaluated on July 12: «Personally, I am not too concerned about the Brexit as prior crises have taught me that these types of events often leads to real changes, and sometimes real reforms. Following the European Exchange Rate Mechanism crisis in 1992, UK growth and employment rose significantly. The good news is that the next six to 12 months will see a move towards the much needed mandate for change. The bad news is that it will come with more volatility and more uncertainty.»

Set against this context, Saxo’s outlook for major asset classes in Q3 is as follows:

EU macro – Migrant crisis fissure

Immigration is the most important risk facing the European Union since the sovereign debt crisis and also the most overlooked. As such and post-Brexit, Europe appears more divided than ever. Mismanagement of migrant policy and economic sluggishness have promoted an anti-elite groundswell across the continent.

The result of the presidential election in Austria, where an extreme right-wing candidate almost won, and the unexpected outcome of the UK referendum represent two grave warnings to Brussels – a solution must be found that unites the periphery and the core, putting an end to the bloc’s timid reform regime of recent years.

Forex – could get difficult

The spectre of the Brexit vote will loom large for some time, with sterling weakness persisting in the wake of the referendum (though likely with waning momentum). We would still forecast, however, the EURGBP pair to peak in Q3 ahead of other key GBP pairs around the longer term questions for Europe, now that sterling has been severely discounted.

Perhaps weighing further on market sentiment, the Fed also seems unlikely to provide support beyond its current inaction and may not believe that monetary policy is the answer to new recession risks. In short summary, the U.S. dollar appears to be the best safe haven in the coming months.

Bonds – low yields, long time

Post-Brexit, global yields once again sank to all-time lows, and with U.S. Federal Reserve Chief Janet Yellen finally capitulating to dovishness, the consensus expectation is very low yields for a very long time. Yet beneath the gloomy economic headlines, there are signs that sentiment is improving in many parts of the economy.

Some of the major risk factors that have affected markets over the past six months have either played out or are largely irrelevant for now, fears around EM instability have subsided and the ECB has begun looking at unwinding QE. In the likely event of a gradual improvement in the global economic outlook, we expect core yields, especially European core yields, to rise swiftly.

Equities – critical quarter

Based on the current trajectory of the global economy, we go into Q3 with a negative view on equities. Among the worst hit sectors, European banks will continue to suffer from a lack of confidence and renewed scrutiny on net interest margins as a result of negative rates, whilst UK equities will also face lower valuations – putting pressure on the FTSE 100.

With the Brexit vote’s impact hitting the financial system, confidence among businesses and consumers may deteriorate enough to edge the global economy closer to a standstill in Q4, which is why we’re looking at the next few months as the most crucial period since the euro crisis of 2012.

Commodities – second wind

The second quarter has bucked trends since 2014 and this year has been no exception after a bullish rally led by oil and gold lifted the whole commodity complex. As we enter Q3, growth prospects across some of the world’s major economies, including the U.S. and China, continue to be called into question and problems in Europe could lead to a knock-on effect in the global market.

With this in mind, coupled with the uncertainty triggered by the Brexit vote and the potential for further dollar strength, we’re anticipating limited upside above USD 50 (EUR 45) a barrel this quarter in crude oil.

Ref: 111.111.111.3503


Leave a reply

Week in Lithuania. Street plaque in Yiddish, Hebrew languages unveiled in Vilnius

A street sign in Yiddish and Hebrew languages was unveiled on Žydų gatvė in the heart of the historic Jewish quarter in Vilnius on Tuesday, September 20.

Economic Diary of Latvia. About strong women in power

This week, members of the Saeima unexpectedly declined amendments that provided for the merging of finance and customs police of the State Revenue Service. After hearing out deputies, Finance Minister Dana Reizniece-Ozola decided not to give up.

Ten million euros to be allocated to assist with elder people employment

Central Finance and Contracting Agency has sent a proposal to the State Employment Agency to apply for European Social Fund financing to realize measures to maintain and improve elder people employment.

Latvia and China sign cooperation memorandum to develop aviation industry

Latvian Transport Minister Uldis Augulis and Administrator of Civil Aviation Agency of China Feng Zhenglin signed a cooperation memorandum on Friday, 23 September. This cooperation memorandum is meant to assist with the development of the aviation industry.

Number of counterfeit products confiscated by EU authorities continued to grow in 2015

According to the latest data published on Friday, 23 September, by the European Commission, EU customs authorities confiscated five million euros worth of more counterfeit products in 2015 than they did the year before.

Businessmen urge professionals to apply for SRS director general’s post

Latvian Chamber for Commerce and Industry invites professionals who fit requirements put up by the State Chancellery to take part in the personnel selection process for the post of director general of the State Revenue Service.

Dogo producer submits additions to court to launch case for slander

Tukuma Straume, manufacturer of Dogo dog food, has submitted documents to Riga City Vidzeme District Court to launch legal action against 17 private and legal persons for spreading untrue, partial and distorted information about the aforementioned product.

Meet «average candidate» for near Lithuanian parliamentary election

It‘s a race that has coalesced many of Lithuania’s heavy-hitters, political wannabes and simply better-life seekers for the same goal – clinching the coveted seat at Parliament.

Estonian presidential nominees feel need for stronger link with Russian community

Days before the decisive vote on the next Estonian President, most candidates have stressed the need for increased communication with the country's Russian-speaking population to establish a stronger link.

119 domestic pigs are put down in Gulbene due to ASF

African swine fever has been recorded in Gulbene municipality’s Ranka parish. Because of it, authorities had to put down 119 domestic pigs.

Burgh Group and Vitol to acquire shares of Richards Bay Coal Terminal

A consortium comprising Burgh Group Holdings and Vitol has agreed to acquire Optimum Coal Terminal Pty Ltd from the Tegeta Group for an undisclosed sum, subject to the relevant regulatory approvals and other conditions precedent.

Quarter of Latvia’s small and medium-sized companies struggle with financial difficulties

Only half of more than 60,000 companies in Latvia have a stable financial situation. 26% of small and medium-sized companies are currently struggling financially. In the next twelve months, they are expected to experience major financial difficulties, according to data from the Credit Information Bureau.

YouTube to encourage users to «snitch» on inappropriate content

Popular video sharing site YouTube has this week announced a scheme to offer rewards to users reporting on videos and comments, which they think are inappropriate to YouTube content guidelines.

Belgian police take 13 immigrants to France by accident

Two Belgian policemen have been handcuffed and questioned in northern France by their French counterparts after being caught with 13 illegal migrants banned from staying in Belgium.

Transit industry: this is the golden moment to decide the future of Latvia’s national economy

Although Latvian Association of Ports CEO Karlis Leiskalns praises the work of Riga Freeport, where he works as well, advisor to Latvia’s Foreign Affairs Minister Sandra Sondore and president of Baltic Association – Transit and Logistics Inga Antane emphasize the importance of all three of Latvia’s biggest ports for the growth of Latvia’s national Economy.

Coalition parties will not form a shared candidate list for elections in Riga

Parties of the ruling coalition – Unity, National Alliance and Union of Greens and Farmers – decided on Thursday, 22 September, to cooperate before and after municipal elections in Riga. They will not, however, form shared candidate lists.

Eesti Energia considers building another plant, if oil price rises

Estonian energy company Eesti Energia (Enefit) has this week spoken of plans to build another oil shale refinery plant in case the price of crude oil surpasses USD 60 (EUR 53) per barrel.

Poroshenko: Russia lies even more than Soviet leaders

President Petro Poroshenko of Ukraine has directed sharp criticism toward Russian foreign policies in Europe during his September 21 speech at the UN General Assembly.

Criminal liability will be applied for serving in foreign army or police force

To reduce possible security risks in relation to military service in third countries, Latvian citizens and non-citizens will be prohibited from serving in foreign armies, police and security institutions. Breach of this prohibition will carry criminal liability with a sentence of up to four years in prison.

Proposal to merge SRS Finance Police and Customs Police is declined

Finance Minister Dana Reizniece-Ozola intends to look for ways to ensure the merging of State Revenue Service’s Finance Police and Customs Police.

Saeima proposes reviewing options to secure free lunches in kindergartens

On Thursday, 22 September, the Saeima decided to ask Cross-Sectoral Coordination Centre’s cooperation platform Demographic Affairs centre to review the option of securing free catering in kindergartens.

Tougher abortion legislation pushed for in Poland

The Polish parliament is this week reviewing proposals backed by Poland’s Catholic Church to make the country’s abortion law even tougher.

Saeima to approve next year’s budget on 23 November

Latvia’s parliament plans to approve the final draft of the country’s budget for 2017 on 23 November, as agreed upon by members of Saeima’s Budget-Finance Committee on Wednesday, 21 September.

EU plan on lifting roaming charges altered

The European Commission this week has announced changes to the European Union’s plan to lift roaming surcharges to people, who use their mobile phones in another member state.

Criminal liability for service abroad and other decisions viewed by Saeima

To reduce possible security risks associated with service abroad, the Saeima on 22 September will conceptually decide on a prohibition for Latvian citizens and non-citizens to serve in armies, police and security institutions in third countries. This is provided by amendments to the National Security Law and Criminal Law.

Newest comments