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Markets: is this a crisis or a normal correction?

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  • Financial markets/economy
Posted on 21.08.2024

After the collapse and sudden recovery of the markets, many investors are wondering what will await them in the coming months. Of course, it is impossible to make firm predictions. Nevertheless, some analysts believe that the scenario of a correction rather than a new crash is more likely: this is the opinion of Jens Ehrhardt, fund manager, interviewed by Handelsblatt. The link between the trajectories of the economy and the financial markets According to Ehrhardt, market developments are closely linked to the economy, which means that only a recession could justify a market crash. The expectations of investors in the markets to see corporate results (such as those presented in quarterly reports) go down, as well as the actual deterioration of corporate results, could actually lead to sell-offs in the markets. Fed, US labour market, interest rates and big tech In this scenario, what the Federal Reserve will do will of course count, and it is likely that, in light of a weaker labour ...

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Is the Fed in danger of blowing the markets' recovery?

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  • Financial markets/economy
Posted on 20.08.2024

This week, many investors are eagerly awaiting Jerome Powell's speech at the annual meeting in Jackson Hole. Jerome Powell at Jackson Hole The Jackson Hole Economic Symposium (to be held from Thursday 22 to Saturday 24 August) is an important event for the world of finance: US central bankers and many others from the rest of the world gather there annually. This year, one of the most anticipated speeches is that of Jerome Powell, Chairman of the Federal Reserve. As Frances Yue writes in ‘Market Watch’, Powell's speech will be closely scrutinised by commentators. The elements of uncertainty in the markets In recent weeks, markets have been characterised by considerable volatility: the Bank of Japan's rate hike and the US labour market data caused mass sell-offs in equity markets. In the following days, markets recovered ground, but uncertainties remain. In this respect, Jerome Powell's Federal Reserve has so far been an element of uncertainty. No one, in ...

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The consequences of a possible Google break-up

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  • Financial markets/economy
Posted on 19.08.2024

What could be the consequences of a (at the moment unlikely, but possible) break-up of Google by the US government in terms of markets and investors? What is the worst case scenario for Google? How much does Google (Alphabet) risk in its anti-trust confrontation? The worst situation at the moment seems to be that of a break-up that the US government might put in place to break the search engine monopoly. In this regard, Angela Palumbo reports on ‘Barron's’ some considerations of analyst Ross Sandler, who notes a certain optimism among investors, but at the same time believes it is too early to draw conclusions. Share price slump on the stock exchange Meanwhile, as Palumbo points out, Google's shares are down 6% since the beginning of the month. Not only that: if one takes into account the drop in the stock's value, the market capitalisation has fallen by almost $375 million since its peak on 10 July. Fragmentation is a risk, albeit an unlikely one But how ...

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What is there to know about the new European green bonds?

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  • Green economy - green bond
Posted on 14.08.2024

Within a few months, it will be possible to invest in a green bond product that will have to comply with a set of well-defined rules, according to the European Union. The overall volume of green bonds Bonds intended for specific sustainable purposes are called 'green bonds': in general, they do not differ in anything from normal bonds, except for the 'green' destination of the capital. As Vitaliano D'Angerio recalls in 'Il Sole 24 Ore', to get an idea of the volume of these products, it is useful to consult the Climate Bonds Initiative. In total, the volume of green bonds amounts to USD 3,250 billion. The new EU regulation In the varied landscape of green bonds, D'Angerio points out an important novelty: as of 21 December, European Union Regulation 2023/2631 will introduce a new product, the European green bond. What are the consequences for those who want to issue products in line with the European regulation? As we go on to read in 'Il Sole 24 ...

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CCT, what is the variable coupon product of the Italian Treasury that investors like?

Posted on 13.08.2024

Government bonds are typically regarded as securities in the fixed income segment. However, there are some products that do not distribute constant interest but of a variable nature over time. Let us look at the case of a security distributed by the Italian Treasury (Ministry of Economy and Finance). The Italian Certificates of Credit of the Treasury (CCT) In 'Il Corriere della Sera', Angelo Drusiani talked about how Italy, with the aim of financing its debt, offers a wide range of financial products. The most widespread are products that guarantee savers a fixed coupon. But these products are also flanked by securities that issue coupons at variable rates: these are, specifically, Treasury Credit Certificates (CCTs). But what is the calculation of the coupon amount based on? How are the coupons and yields of CCTs calculated? The coupons of these products are six-monthly and indexed by reference to ordinary Italian Treasury bills (BOTs), which are also six-monthly. As the M ...

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Geopolitical risks and the race to some markets more emerging than others

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  • Financial markets/economy
Posted on 13.08.2024

The situation of growing geopolitical uncertainty (Iran's possible direct involvement in the Middle East, the current Ukrainian offensive on Russian territory, the prospect of increasingly tense relations between the US and China, etc.) is prompting many investors to evaluate strategies in search of value for their portfolios. Investments: the variable of geopolitical tensions As also reported by 'Financialounge' in an article by Annalisa Lospinuso, according to the results of the Invesco Global Sovereign Asset Management Study, geopolitical tensions are now a key variable for many professional sovereign fund managers. This is shown by the fact that the asset allocation of many of these investors takes geopolitical risks into account. In particular, an escalation of armed conflicts in the Middle East and trade tensions between the US and China. On the other hand, this situation of uncertainty can also represent an investment opportunity in its own way. Near-shoring and e ...

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Has the time come to switch to bonds?

Posted on 12.08.2024

Rising markets, the spectre of a possible recession, and the likely arrival in September of a first rate cut: is it time to lean a little more on bonds to protect your portfolio? Market rises are now followed by volatility The high volatility in the financial markets is leading many investors to consider changing their investment strategy, at least in part. In recent weeks, in fact, the almost constant rise of the markets in the first half of the year has been followed by a phase of strong corrections and recoveries, starting with Monday 5 August's collapse of the Nikkei (over 12%), followed by a rapid recovery. Hard landing' becomes more likely again Uncertainties are growing. On the one hand, it is true that to many investors it seems increasingly likely that the Federal Reserve (Fed) will cut interest rates in September. But contrary to what one might have believed even just a few weeks ago, the US may be in a 'hard landing' rather than a 'soft landing' s ...

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Looking at the whys and wherefores of extreme stock market volatility

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  • Financial markets/economy
Posted on 12.08.2024

A number of factors contributed to the sharp stock market corrections that occurred in recent weeks. Some of the reasons behind the stock market slump Here are some of these factors: really high valuations of some stocks, especially US tech stocks; below-expected quarterly reports of those same high-priced companies; further postponement of the interest rate cut by Jerome Powell's Federal Reserve; limitations of carry trade opportunities in Japan, following the Bank of Japan's interest rate hike; and the strategy of some investors who, in the run-up to the summer, decided to capitalise on the stock market's rises by selling their shares. The end of the 'carry trade' via Tokyo In 'Il Sole 24 Ore', Vito Lops writes about the end of the 'Japanese carry trade bubble'. But how does it work? Until a few weeks ago, the low cost of the Japanese currency, the yen, particularly in relation to the dollar, as well as zero interest rates, made it possible to ...

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Chinese equity: taking advantage of discounts?

  • 250
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  • Financial markets/economy
Posted on 09.08.2024

What is the situation of the world's second-largest economic power, China, from the perspective of financial market investors? Economy and real estate market in China The strong economic growth that China had become accustomed to in recent years is slow in coming. The hope now, as Sandra Riccio writes in 'La Stampa', is that after the Third Plenum of the Chinese Communist Party, the measures devised by the government may begin to have a positive effect on what has so far been one of Beijing's greatest weaknesses, the property market, which after the Evergrande and other sector operators' crisis has not yet managed to recover. The lack of stock rises this year in China The uncertainty surrounding the future development of the Chinese economy is also reflected in the performance of the stock market: as Riccio points out, the Csi 300 stock index has fallen by 0.5% since the beginning of the year; this figure is even more significant if one compares it with the rise ...

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Trump vs. Harris: a perspective on oil prices

Posted on 08.08.2024

That Trump represents the best candidate as far as the oil market as a whole is not so obvious. The prospect of a Trump presidency drives up the price of oil shares In an article in the Wall Street Journal, Jinjoo Lee argues that Donald Trump's victory in the November election would not necessarily be good news for the oil industry. At least in the short term. Indeed, promises to lift restrictions could lead to increased competition in the industry. The scenario of what could happen with a Trump victory was seen after the debate that showed Joe Biden's physical weakness and led him to drop out of the race: in that case, as Lee points out, the share prices of a large segment of oil companies rose, while the price of oil fell. The effects of a Trump victory and the effects of a Harris victory on oil prices This apparent paradox - share prices linked to oil companies rising, while the price of the commodity falls - can be explained by the effect of a liberalisation of the mark ...

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Warren Buffett sold half of his Apple shares: why?

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  • Financial markets/economy
Posted on 07.08.2024

The series of sales undertaken by Warren Buffett's financial conglomerate Berkshire Hathaway also involved a stock that represents an important asset within Buffett's portfolio, namely Apple. Buffett halves his position in Apple The sale was of decidedly remarkable proportions: 390 million shares put back on the market, which reduced Buffett's positions in Apple to just over USD 84 billion. As we read in 'La Repubblica', which reported on calculations made by the 'Financial Times', Buffett cited tax reasons as the reason for this reduction: Berkshire Hathaway's shareholders could be weighed down by the increase in the tax on capital gains (a tax that is expected - we also read in 'La Repubblica' - to be increased to cover the current deficit situation). More liquidity to take advantage of market opportunities Despite all this, it is clear that Buffett's Berkshire Hathaway is pursuing a strategy of increasing liquidity. Could it be to take ...

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Markets collapse: why and what is worth doing?

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  • Financial markets/economy
Posted on 06.08.2024

There is already talk of a black Monday for stock markets with regard to yesterday, 5 August, during which the three major US indices confirmed the downward trajectory of the past few days: Dow Jones -2.6%, S&P 500 -3% and Nasdaq -3.4%. The slump in Asia, and losses on Wall Street and in Europe Also weighing on the results of the US stock exchanges was the -12% fall recorded by the Nikkei, Japan's largest stock exchange: although the index recovered some of these losses today, it was the biggest drop in over forty years. Europe also experienced the repercussions of these strong corrections: the DAX 30 lost almost 5.6% in the last five days, the CAC 40 just over 4%, the FTSE 100 -3.4%. Why did the markets fall? There are two reasons that can explain the current slump or, at any rate, the sharp declines in the stock markets: the disappointing performance of US big tech and the Federal Reserve's failure to cut interest rates. The Weight of US Big Tech In the 'Corrier ...

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