12 to 18 August: Intensifying political uncertainties weigh on investors’ risk appetite

The Trump administration took the markets by surprise as the Office of the US Trade Representative announced that tariffs on Chinese imports to the US will be delayed to the 15th December on a range of goods such as mobile phones, computers and video game consoles. However, markets remain unsure how to interpret this move in the context of sluggish German economic activity, inverting yield curves in developed markets, protests in Hong Kong, Brexit-related economic and market jitters and increasing probability of the return of a populist government in Argentina. The combined impact of these developments triggered massive capital flows seeking safe haven assets. As a result of intensifying risk aversion, sovereign bond yields plummeted and hit new historical lows in Germany and Switzerland, where the 10-year yields decreased to -0.7% and -1.1%, respectively. It will be more relevant than ever to listen carefully to the speech by Fed Chair Jerome Powell at the annual Jackson Hole Symposium (23-24 August), as the Chair’s speech will most likely shape global investor sentiment.

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