Bank of America Merrill Lynch said the third-largest drop in October, the value of the shares since 1970. After the fall in the value of shares and bonds in October has exceeded $ 5 trillion! According to The Wall Street Journal.
Even the investment portfolio with a strength of 75% bonds and 25% in the price of shares fell 2% in October and YTD by 1.3%. The annual decline in government Treasury securities and investment grade bonds was 9.7% and 4% respectively.
Analysts warn that investors now is not possible to “hide” from declining markets. The reason for this became as fears that the us economy is on the verge of overheating and a slowdown in the growth of the giants of the Internet industry Amazon and Google, along with the threat of a trade war between the US and China.
In addition, in the political arena the situation has escalated because of a possible Italian exit from the European Union.
As a result, the S & P 500 index in October fell by almost 7%. Europe 600 index slipped in October by 6%, the Japanese Nikkei fell by 10% and the global MSCI All-Country World lost 8% (for him this is the worst result for the last 6.5 years).
In 2018 the most lost markets in China (27%), Turkey (25%), Italy (24%), the Philippines and South Korea (22%). The securities markets of many countries have demonstrated at least 2-3 years. If we take the countries with a stock market capitalization of 100 billion dollars and more of them in the world 39 — at the end of October is above the yearly lows were stocks only 9 countries (Brazil, India, Israel, Norway, Russia, Saudi Arabia, USA, Switzerland, Japan ).
On the background of falling stock markets, tight monetary measures of Central banks, has been the withdrawal of capital from emerging markets. The withdrawal of capital from emerging markets, which can be a harbinger of the crisis, accelerated — according to the Institute of international Finance in October it amounted to 17.1 billion dollars. This is the maximum monthly rate for the last 5 years.
What are the predictions of further decline of stock markets and the economic crisis in the world? Somewhat smaller, but similar scale of decline in equity markets in 2012 and in 2015. On the other hand, the real sector of the US economy is highly dependent on the situation on the securities market — as a rule, if the decline in the stock market is close to 30%, comes a recession. U.S. President J. trump criticizes fed’s George.Paula, considering that the increase in the fed’s rate may be the collapse of the stock market threatened a full-scale crisis. The story reflects the fact that in 2001, the bubble in the market dotkomov was “pierced” because of the growth rate in 2008 “bubble” in the real estate market “burst” also after the rate hike of the fed.
Not without a response by the monetary authorities of the United States. Members of the Federal reserve system at the meeting in Washington will discuss how to describe the slowdown of US economic growth and reinforce expectations for the fourth this year a rate hike in December.
The Committee FRS on operations on the open market is expected to keep its target range in the base rate unchanged at the level of 2-2. 25 percent by the end of the two-day meeting on Thursday. In the statement on monetary policy, the growth of the U.S. economy and labor market are likely to be still named a strong that will increase the chances of strengthening in December. Other changes in the statement may indicate less confidence in the need three promotions in the next year, as predicted by FOMC members in September.
Press conference of Chairman Powell’s, this time not planned, but economic forecasts are updated in December. Futures on interest rates show that investors assess the prospect of higher borrowing costs in December, about 78 percent.
It is likely that the fed will retain unchanged rationale for the further gradual increase in rates, and there is also a view that the risks to forecasts are “broadly balanced”. It is unlikely that the fed will change the wording of “slight” gradual rise, but if that happens, investors will perceive the correction as green light, indicates the approaching end of the tightening cycle.
Also unlikely to change the characteristics of inflation. For the first time since 2012, the Central Bank has put a target price growth at 2 percent, the indicators of both basic and consumer price inflation reached the fed’s target in September. In the face of persistent unemployment in the U.S. at 48-year low of 3.7 percent, the fed members can welcome some slowing of growth. Some representatives of the regulator has previously expressed concerns about overheating although inflation remains benign.
Even if we assume that the world stock markets will continue to fall, the situation in the economies of the US and China will become more complex, it is reasonable to expect turbulence in the global economy. This will affect most countries, and Ukraine is no exception. If the situation deteriorates in the economies of our main trading partners and lower commodity prices, as is the case with the crisis, the time will come challenges for the economy. In most peripheral countries, which include Ukraine, can begin a serious problem because the development of these countries was mediated by the development of the world economic centers — the US, China, EU. China will continue to buy Ukrainian agricultural products in the current volume in the case of the global economic crisis or collapse of prices of agricultural products do not? Whether Ukrainian metal to be in demand at current levels and not lower prices? The prerequisites for concern there. It is of course possible and the profit in the form of falling energy prices (oil usually falls in parallel with the stock indexes, with a small lag), which form a significant part of Ukrainian imports and because the cost of fuel affect wholesale and retail prices in the country.
We will remind as earlier noted, energy prices, particularly oil, started to decline. The price of Brent crude oil fell below $ 72 a barrel for the first time since Aug. The cost of the futures on Brent crude for delivery in January 2018, during trading on the exchange ICE in London fell by 1.8% to $ 71,86 per barrel, as evidenced by the auction.