Globally, the stock markets surged after seeing a bounce in the Italian assets and with all eyes on the earnings season, the stocks steadied at least for now.
The European markets saw stock climb up from its 22 month low. This was followed by Asian markets seeing some gains, typically Nikkei, Japan’s blue-chip index, saw a rise of more than 1% after going down by almost 2% the day earlier.
Back in Italy, stock and bond market firmed up following comments by their Economy Minister about how an expansionary budget would help the country. This also led Euro to firm up.
Also, the sentiment that Europe will witness a double-digit growth in earnings in the 3rd quarter also gave a boost to the market.
Major currencies dropped against the US dollar. While Japan’s yen took a 3% downswing, the Swiss Franc too slid from its 2-week high. Also, gold was on back foot after soaring at 2 and half month high on the previous day amid rising tension between West and Saudi owing to the sudden disappearance of Saudi journalist in Turkey saw investors move away from risky assets.
Given the current political scenario, coupled with trade tensions globally, higher interest rates in the US and the concerns about the economy as a whole indicate that caution should be exercised.
Long-term treasury returns jumped to its highest since 2011, making investment in equity less attractive, as Dow (blue chip) already shed 4.5% in this month.
Chinese share market closed lower as factory gate inflation had lost steam for 3rd consecutive month as domestic demand remained weak, indicating underlying problems in the economy.
The Saudi incident attracted global attention, while the US stock market hasn’t yet seen any major improvement. This will reflect on the other equity markets and turnaround will take some time.