Global equity markets continued to roar back, eating up the big losses from earlier in the week and even bond yields began to stabilise. US 10 year bond yields bounced to 1.75%, while German 10 year bonds remain mired at minus 0.5%. The panic over the US/China war that has manifested in market panic over global growth and global currency wars. Central Banks have acted quickly to encourage monetary stimulus, in an effort to combat global growth threats. Chinese exports surprisingly jumped 3.3% and are now up 10.3% for the year, while imports have fallen to zero. The Dollar rebounded, with the EUR drifting to 1.1180, while the GBP slipped back to 1.2130.
The collapse in commodity currencies, following the surprise action of the RBNZ, has partially stabilised and began to recover. The NZD has pushed back to 0.6475, while the AUD has looked to regain 0.6800. despite the vulnerable environment they still operate in. As major Chinese suppliers, they are particularly susceptible to targeted market action and reaction. The surprise jump in Chinese exports was a boon to these challenged and trade exposed currencies.
One serious and very real danger beginning to rise in Western economies, is the new advocacy for Keynesian fiscal, infrastructure spending. The extremely cheap money, created by global Central bank monetary policy, encourages governments to borrow and invest in major infrastructure projects. This infrastructure borrowing is considered 'good debt'!? Global debt levels already far exceed dangerous pre-GFC levels and the massive excesses of Governments projects (not to mention the viability or validity of projects) will drown national economies in overwhelming debt.
Paul Bettany
Collinson & Co
0406-744-923