Equity markets in the major global economies continued their recent dismal performance. Concerns about global growth continue to weigh on markets as the IMF this week lowered growth forecasts for 2014 and 2015. The Dow Jones is now essentially flat for the year.
ECB President Mario Draghi maintains his pledge to boost inflation in the troubled Euro area. Debate between Jans Weidmann, President of the German Bundesbank, and proponents of asset purchases grew louder this week, demonstrating the chasm between camps.
U.S. debt was the beneficiary of equity market stress this week. The 10 Yr Treasury bond has seen its yield fall considerably over the past few weeks and is currently testing some of its lowest levels for the year.
Minutes from the September meeting of the Federal open Market Committee were released this week. Officials cited concerns that the dollar’s rise would keep inflation low. Markets jumped on the news, interpreting the inflation discussion as supportive of maintaining extraordinary monetary policies.
Brazil’s markets rallied early in the week in light of the first round of the country’s Presidential race. President Rousseff claimed the highest portion of votes, but was not able to secure a run off. Her opponent is viewed as having a more friendly posture to business. The runoff will commence on October 26.
Bank of Japan Governor Kuroda maintained his stance on the benefits of the Yen’s fall towards lawmakers this week and insists the economy is moderately recovering. Prime Minister Abe however veered towards concern in price rises fueled by currency depreciation and not wages.
Oil continues to fall as poor growth outlooks keep a lid on potential demand. While OPEC has increased production the Wall St. Journal reported this week of growing dysfunction within the group.
Bankers agreed on new rules to closing derivative positions this week. The hope is that reforming the rules will prevent a run on any single bank. Skeptics are concerned it may spark uncertainty and contagion risk.