Snapshot - Economic & Strategy Viewpoint
Caspar Rock: Monday markets - the week ahead on 19 August
Markets remain troubled by a range of factors including Italian political events, weakening European economic data – and the inversion of the yield curve.
- Last week saw markets particularly excited about the inversion of the yield curve (where short dated bond yields are higher than longer term ones), an historic indicator of recession.
- This is only a leading indicator with a significant lag. Previous instances of yield curve inversion saw stronger equity markets before any recession.
- Elsewhere markets were troubled by domestic political events in Italy and Argentina.
- This week will bring publication of the minutes of the latest Fed meeting at the end of July (where rates were cut).
- The G7 meet in Biarritz over the weekend, and there will be side discussions about trade and Brexit.
- Given thin markets volatility cannot be discounted.