Are we entering into a new recession?

Weekly Report - 25/03/2019

Are we entering into a new recession?


One of the most important indications that tend to give clues regarding the future of the economy is the Bond market. We witnessed in the past the fact that when the 3-month US Treasury yield is going above the 10-year yield, which is considered a benchmark, it’s an initial warning of a recession. In the past, especially in 2007, just before the Global Financial Crisis. The main driver was the Federal Reserve after their dovish tone and the statement that they’re going to pause interest rates hikes for 2019. The Fed s Chair Jerome Powell gave access to cutting interest rates.

In Europe, German Manufacturing PMI dropped sharply, steering to a deep decrease in Europe while Brexit was delayed by 14 days. What else supported the negativity is that German 10-year yields became negative.

The Week that was

The United Kingdom received an extension for its withdrawal from the European Union, although the period of that extension will depend if May persuades the UK parliament to allow the passing of the Deal that they already declined before. Donald Tusk the President of the European Council stated that the bloc is going to allow an extension up to May 22 only if Theresa May is prepared to convince the British parliament to accept the existing Brexit settlement. If Prime Minister cannot persuade the parliament to allow the deal then England would experience a chaotic departure from the European Union on April 12.


Main Focus This Week 

Anticipate further updates regarding the trade talks between the U.S and China this week. The markets are watching and waiting for a decision to the ongoing problems that were created during the Summit. On the other hand, FOMC member commentary may present a direction. Next week is important to the pound. One more Parliamentary election on Theresa May’s agreement next week is required following the EU’s extension ‘till 22nd May.


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