Global Markets Newsletter – August 2022

August moved at the pace of high inflation, worries about recession with no further developments on higher rates except for the ECB which announced its intention to increase its rates in September. The war in Ukraine is still on and Taiwan enters into turbulence as US Secretary Nancy Pelosi visits the country in a unprecedented move to support Taiwan versus the Chinese domination. China is not to be ignored and hence volatility returned in the markets.

In the US, economic releases showed a mixed image related to the great enemy, the inflation which was reduced marginally from 9.1% to 8.5% (July data), unemployment was announced at 6.7%, retail sales up by 10.02%, exports up by $5bln and imports diminished by only $1bln. Housing market continues it weakening as housing starts were down by 12.6% and building permits were down by 1.3%.

In Europe, economy was booming at a lower pace. August was at its best concerning. In the Eurozone, inflation was at 8.9%. Many countries (Germany, Austria, France, UK) announcing measures against dry summer, and economic tips and restrictions how to save electric power as natural gas from Russia, which is used as a main source in producing electric power, remains a difficult riddle to solve for the coming winter. GDP for the 2nd quarter was increased by 3.9%, unemployment remained low at 6.6% and retail sales were down by 3.7%. However, Europe is bound to enter into recession as inflation, increase of exports, decrease of imports, decrease of disposable income coupled with higher interest rates may trigger a recession. Still some countries have severe debt and deficit issues.

In Greece, elections were announced by the Prime Minister to be held in May 2023 (last elections were on 2019), with the international fair of Thessaloniki to be expected for economic announcements. August was indifferent concerning new bond issues and stock exchange was down due to worries for a difficult winter and volume was also low.

The EUR/USD went below parity (1.00) and stayed there as the American dollar and its higher rates, attract investors better than the European currency which is expected to rebound but after several weeks in order to apply its new higher interest rates.

Due to increasing interest rates, bonds are not attractive, and have already suffered severe capital losses. The only alternative for investments in order to achieve a higher return than risk free rate is stocks of profitable companies with prospects. We buy selective tech stocks in US and hold excess liquidity awaiting proper timing.

S&P-500 (6 month graph)

Source: Investing.com

EuroStoxx-50 (6 month graph)

Source: Investing.com

EUR/USD  (6 month graph)

Source: Investing.com


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