The currencies markets have experienced successive wild moves since 2010 (figure 1) due to the following events:
2010-2012: The Euro Zone Crisis weighs on the euro (EUR) exchange rate.
2012-2015: The Japanese yen (JPY) devalues following massive quantitative easing undertaken by the Bank of Japan.
2014-2015: The US dollar (USD) appreciates after the Federal Reserve starts to taper [...]
Over recent months, Deutsche Bank (DB) has been in dire straits. Its share price has plummeted (-52% year-to-date); its CDS have skyrocketed (see figures 1 and 2). At the beginning of this week, German politicians even intervened by assuring that a bailout would neither be needed nor granted (if needed). Like in the world of [...]
September 22, 2016, by Dr. Christian Witt
Since the onset of the 2007-08 global financial crisis, the European Union (EU) has continuously lurched from one crisis to the next – unfortunately without definitely resolving any of them. This “kicking-the-can-down-the-road” behavior has left a mounting number of unresolved issues behind: Refugee crisis, Italian economic malaise, ailing European [...]
September 13, 2016
On Thursday 8th September and Friday 9th September, financial markets suffered a strong simultaneous decline across asset classes driven by a rise in interest rates. As shown in figure 1, bonds dropped by more than -2.0 standard deviations over the period while equity markets fell between -1.5 and -2.0 standard deviations.
When the dust [...]
Since mid-February 2016, when a vicious rout in global equity markets eventually came to a halt, stocks in emerging Asia have outperformed those in the rest of the world by a wide margin (see figure 1). Why?
To answer this question we first try to learn more about the index composition. So we break down the [...]
August 31, 2016
In the wake of the Jackson Hole meeting, it seems that the Federal Reserve (Fed) has sought to convince investors that further rate hikes are imminent. In fact, FOMC chairwoman Janet Yellen said that “the case for rate hike has strengthened in recent months“. Fed Vice President Stanley Fischer was even more hawkish [...]
Euro zone banks have lost more than 33% of their equity value since the start of the year 2016. As shown in figure 1, the loss of equity for investors over the last 10 years amounted to a staggering 77% even after accounting for the distribution of dividends. In the same period, the Euro Stoxx [...]
Ever since the Brexit referendum on June 23, 2016, capital markets seem to go crazy as equities, bonds and precious metals all soar at the same time (figure 1). This has baffled many investors because such an exceptional situation should not last long. The features of each of the three asset classes are just too [...]
Going forward, a USD Value theme is likely to dominate the evolution of risk assets.
This conclusion is based on a visual analysis of cross-market correlations using a “Minimum Spanning Tree” shown in figure 1. Two “risk on” branches, or investment themes, stand out and thus merit closer inspection:
The first “risk on” branch consists of USD-denominated [...]
Two weeks into the post-Brexit world, it is about time to draw first conclusions on its impact on financial markets. The most noticeable observation is a global slump of rates. As a matter of fact, since the Brexit vote on 23rd June, 10-year government yields fell more than 40 bps in safe have countries. Astonishingly, [...]