Read our market review and find out all about our theme of the week in MyStratWeekly with our experts Stéphane Déo, Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
This week :
Topic of the week: The market, too complacent about Italy?
- This is our last weekly before a break month. The next issue is on September 5. In the meantime, we wish you all a great holiday;
- Italian assets suffered with the resignation of Draghi and the return of political risk: broader sovereign spreads and underperforming stock exchanges;
- A closer analysis shows that the specific risk of the Italian elections is, paradoxically, very little taken into account by the markets. In case of a bad surprise (a poll, an untimely announcement of a policy, etc.), the risk is that Italian assets will suffer much more.
Market review: Should we buy the recession?
- The ECB raises rates by 50 bp, first hike since 2011;
- The ECB launches a new crisis tool (TPI);
- Political crisis in Italy: elections scheduled on September 25;
- Extreme volatility in bond complex, risky assets bounce.
Chart of the week
The ECB surprised with a 50 bps rise last week. Paradoxically, after this bullish surprise, markets are anticipating a lower end-of-year landing.
The aggressive attitude of the ECB but also the very disappointing surveys, especially the PMIs, are driving up recession expectations.
As a result, expectations of rate increases for next year have dropped significantly. In mid-June, the market was expecting five rate hikes in 2023, and we are now only up half a hike.
Figure of the week
30% of the countries in the EMBIG index are in “distress”, i.e. with a spread over 1,000 bp.
This is an unusually high proportion, unseen since the 2009 crisis.
MyStratWeekly : Market views and strategy
Download MyStratWeekly - July 25th 2022
The podcast
Every Wednesday, tune in to the podcast by our Head of Markets Strategy Stéphane Déo for a market update and some insight into a theme of the moment.
This week:
- ECB, Fed;
- Leading indicators;
- Back to Italy.