The global economy’s slowdown accelerates losses of several leading regions. Business activity PMI index kept falling in Germany, the largest European economy. German Gross Domestic Product declined the first time in three years. Although the volume of the negative result was comparatively small, it’s still painful for the German economy as it never happened recently. The main part of the slowdown was seen in exports which caused by the falling investments and consumer confidence. Business activity in the rest of the Eurozone was also stagnating with the PMI index reaching to the important level which divides growth from decline. The same outlook for the leading world’s economy - the United States - was noticed, however, things aren’t as dramatic as in Europe so far. It seems like many analysts’ predictions for a global economic recession started to materialize.
Turkish Lira is not the worst currency in the world any more, as Russian Ruble took the unwished title. The three-month PUT options reward for Lira appeared to be lower than the same measure for the ruble the first time since the middle of May. Reversing risk indicator fell for Turkish Lira to 3.8 percentage points from almost 12 during the meltdown and currency crisis in Turkey in August 2018. The decline of the index accelerated after the Central Bank of Turkey hiked the interest rates up to 24 percentage points in September. Traders’ optimism increased after the United States cancelled a number of sanctions due to Ankara's decision to free American pastor Andrew Branson. At the same time, the exchange rate of Russian ruble faced the selling pressure amid falling oil prices, while investors worry that the U.S. will tighten sanctions against Russia. The reverse risk market indicator surged to the highest value since October 4 right after the incident in Azov sea, involving Russian and Ukrainian warships.
On the other side of the Atlantic, the most accurate strategist this year predicted 12-month stagnation for the United States economy. Mike Willson, the largest bear of the equities market in Wall Street said that the same picture might continue next year. This October’s market plunge was caused by the sell-off in shares after the Federal Reserve changed its hawkish view on the leading world’s economy, predicting a certain slowdown. The recent macroconomic data confirmed that suggestions including GDP, trade balance, consumer sentiment, inflationary pressure and durable goods orders. Morgan Stanly head strategists predicted that S&P 500 benchmark will finish next year at the same level of 2750 points which is currently forecasted for 2018 year-end as well. Willson’s assumption seems to be the most accurate four weeks before the year-end. The analyst differs from others as he predicted a ‘bear wave market’ this year, and that’s exactly what’s happening nowadays with equities charting sudden reversal several times, hovering up and down. As long as benefits for the tax cut reform is lowering its impact in the United States, and the global economy slows down its growth, the corporate sector loses its attraction as well. So, corporate profits index would fall to 4.3% from the current level of 23%, and that will influence traders’ sentiment, according to Wilson.
The core inflation in Eurozone is also a concern for investors in the financial markets. European Central Bank told that core inflation should pick up the growth momentum in November, however, the reports show a completely opposite situation. Despite the economy’s vulnerability, inflationary forecasts were stable so far, and ECB officials were underlying a threat of hidden consequences and reasons to worry. Last Friday’s expectations for the core CPI were at the level of 1.1%, in line with the previous reading. However, the report showed as low as 1.0% growth in core CPI which is definitely negative for the single European currency. Goldman Sachs predicted that inflation would not change significantly during the next year, and that eliminates a background for the ECB to start the tightening cycle and stop the quantitative easing program with multi-billion injections of additional liquidity to the financial system. If ECB lowered core CPI forecast for the next year, then Euro would plunge versus major currencies including the U.S. dollar.