Global markets posted another wild week even though Chinese markets were closed due to the New Year. Volatility out of Japan and Honk Kong and the poor performance of the financial sector weighed heavily on stocks despite a relief rally on Friday.
Oil reached a 13 year low this week after closing below $26 per barrel on Thursday. Rhetoric between crude bulls and bears is growing with the former touting potential production cuts and the latter emphasizing poor global economic conditions and a supply glut.
Bank shares have seen an awful start to 2016. Volatility in the markets is keeping IPOs away while falling interest rates is weighing on profitability. Doubts surfaced this week over Deutsche Bank’s ability to meet coupon payments leading the bank to declare it has ample funds and announce a buyback. Shares of the German lender are down over 40% this year.
Janet Yellen’s testimony to Congress this week spooked markets as the Fed Chair testified that financial conditions had become “less supportive of growth.” She also stated that negative interest rates were not off the table from a legal perspective. Investors flocked to bonds and gold on her words.
Sweden’s central bank lowered interest rates even further into negative territory. Growth over the past year has accelerated beyond forecasts but inflation still remains below the bank’s target.
The Yen reached its strongest mark against the dollar in over a year. The Nikkei’s 5% plunge on Tuesday pushed capital into safe haven bonds, currencies and gold.
The Baltic Dry Index hit a record all time low this week. The index is a metric frequently used to gauge the health of the global economy and trade levels. Maersk, the largest operator of container vessels, stated this week that it is facing business conditions worse than the peak of the financial crisis.