FINANCIAL MARKETS WEEKLY - Global stock markets declined

    • Financial markets weekly

Last week, we did not learn anything fundamentally new from the global economy. New macroeconomic data have only confirmed that the global economy is currently in the deepest economic downturn since the Great Depression in the 1930s. At the same time, the International Monetary Fund warned that the current development is even worse than the fund expected a month ago in the pessimistic scenario of its forecast for the global economy. Therefore, it cannot be ruled out that the global economy will fall by more than 5% this year.

FINANCIAL MARKETS WEEKLY - Global stock markets declined For Czech investors, perhaps the most important news was the rather pessimistic statement of the Czech National Bank regarding the outlook for the Czech economy. According to the current base CNB scenario, the Czech economy should decline by 8% this year. CNB is not currently positive about negative interest rates; however, the CNB is internally debating a wide range of non-standard monetary policy instruments such as quantitative easing, ie government bond purchases, yield curve control, ie targeting yields to maturity of government bonds or a new exchange rate commitment. In a pessimistic scenario, koruna could weaken to the level of 32 CZK/EUR. Koruna reacted to these reports with a relatively significant weakening, against the euro by 1.6% to the level of 27.59 CZK/EUR and against the dollar by 1.5% to the level of 25.55 CZK/USD.

Data on Czech GDP for the first quarter were published on Friday. Czech economy declined by 3.6% quarter-on-quarter, while the year-on-year decline was -2.2%. The preliminary value of GDP development was thus slightly worse than expected by the market consensus of -3.4%. The most significant quarter-on-quarter decline in the domestic economy to date was 3.5% in the first quarter of 2009, when the impact of the global financial crisis culminated.

According to the broadest global stock index, MSCI All Country World, global stock markets fell by 2.4%. Emerging markets performed relatively better, weakening by only 1.2% according to the MSCI Emerging Markets index. Developed markets depreciated 2.6% according to the MSCI World index.

Bloomberg Barclays global bond index weakened slightly by 0.1% last week, while the average global yield to maturity rose slightly by two basis points to 1.07%. The S&P GSCI global commodity index depreciated by 1.0%, while the price of Brent North Sea crude added 4.9% to $ 33 per barrel.

Michal Stupavský
Investment Strategist Conseq Investment Management, a.s.

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