Published Thursday, economic statistics from Europe and the US were positive, but they could not change the world markets.
Investors received some breathing room yesterday due to strong data on German employment and US GDP for the third quarter. Unfortunately, another crash of the markets is still possible, driven by the risks of new large-scale quarantine measures in Europe.
Economic statistics from Germany and the United States and the final decision on the ECB’s monetary policy were able to stop the global sell-off in the stock and commodity markets but only for a short period. Investors ignored them, entirely focusing on the topic of quarantine measures in Germany and France, records of coronavirus infection in the United States, and the high risk of the outbreak of riots in the US after the presidential election.
According to the data, the number of unemployed in Germany fell by 35,000 in October against the forecast of 5,000. The unemployment rate fell to 6.2% from 6.3%. The values of consumer and business confidence in the eurozone were also positive, which retained the previous value of 90.9 points against the expectation of a decrease to 89.5 points.
The whole world was waiting for the GDP figures for the 3rd quarter in the US. The numbers exceeded all expectations. The indicator’s growth amounted to 33.1% against the forecast of 31.0% and the previous value for the 2nd quarter of -31.4%. The GDP deflator also increased significantly. It amounted to 3.7% against expectations of an increase of 2.7% and a fall of 2.1% over the previous period under review. The unemployment benefits applications number for the past week turned out to be positive, which fell to 751,000 against 791,000 a week earlier and the forecast for a decrease to 775,000.
The final decision of the ECB on monetary policy did not bring anything new. The monetary policy parameters were left unchanged. After the meeting, the ECB President, Christine Lagarde, said that the soft monetary policy would remain at least until the middle of next year.
On the foreign exchange market, the general negative sentiment fully manifested itself. The dollar received significant support again, as did the Japanese yen. All this happened against the backdrop of the strongest sell-off of US Treasuries.
What to expect soon
I believe that global markets’ behavior indicates that expectations of a resumption of strict quarantine worldwide are growing because of what happens in Europe. This affects the demand for risky assets and pushes up the dollar and yen rates as safe-haven currencies. An additional negative is the high level of fear of unrest in the US following the presidential election. I believe that the generally negative trend in the markets will continue for a while.