Wednesday , August 10 2022

Greek government debt in the eyes of investors is less risky than the US


As the US central bank is preparing for the first interest rate cut in a decade, the stock market mood is optimistic this year, as the New York stock indices are at record highs. On the other hand, the profits of US companies after last year's bold leap (as a result of the trumpet tax reform) stagnated on average more than the second quarter in a row, but there are a lot of positive business listings between April and June. Facebook's quarterly profit has risen by 28% (to 16.9 billion dollars) and alphavit by 19% (to 38.9 billion dollars). Photo: Reuters

Germany's leading economic expectations index, Ifo, dropped to 95.7 points in July, the lowest since April 2013. However, the DAX30 index of the Frankfurt stock exchange rose 1.3% last week. Photo: Reuters

Hot Summer on Stock Exchanges! The shares of S & P and Nasdaq jumped 2.3 and 1.7% last week. Quarterly business posts are generally better than expected. It is true that Boeing was disappointed with the high loss (as a result, the elite Dow Jones gained only 0.1% throughout the week) but the technology companies shone. Alphabet, a Google subsidiary, earns $ 38.9 billion in revenue from April 1 to June 30, up 19 percent from the same period last year. Alphabet also welcomed the $ 25 billion worth of large-scale equity purchases. Shares of Alphabet jumped almost 10% on Friday as the price reached $ 1,265, up 2% to the highest value in the past year.

Business results disappointed Boeing and Ford. Boeing lost $ 2.9 billion in the second quarter due to landing 737 MAX. Ford had $ 148 million in quarterly profits, which is less than analysts' expectations, and disappointed by the profit forecast for the year. Shares fell by more than seven percent on Thursday, but still since the beginning of the year they are still 25 percent in the plus. Even worrying, many US companies are predicting lower profits for the rest of the year. Photo: Ford

Decade of American Economic Growth
Next week, nearly 170 companies included in the S & P 500 index will post business results, including Apple. New data from the labor market will be announced on Friday, and investors will expect the Federal Reserve session in particular (July 30 and July 31). The first estimate of the US economy's growth in the second quarter was encouraging: GDP (after 3.1% growth in the first quarter) increased by 2.1%, which is above the forecasts (1.8). The economy in the world's largest economy has been record for a decade, but on Wednesday, the Fed will almost certainly lower the key rate by a quarter. On Thursday, the European Central Bank did not change the interest rate. Mario Draghi thought he was a bit more optimistic about the economic situation than analysts expect (according to Draghi, the risks of recession are low), which reduces the likelihood of major interventions in monetary policy. However, the ECB is still expected to reduce its negative deposit rate in September.

Dow Jones (New York) 27 188 points
Nasdaq (New York) 8.330 points
DAX30 (Frankfurt) 12,419 points
Nikkei (Tokyo) 21,658 points
SBITOP (Ljubljana) 873 points
10-year Slovenian bonds Required return: 0.16%
10-year US bonds Necessary return: 2.08%
EUR / USD 1.1128
EUR / CHF 1.1051
Bitcoin 9.450 USD
crude oil 64.42 USD
gold 1.418 USD
euribor (six months) -0.368%

Bitcoin was yesterday over the psychologically important limit of $ 10,000, and then lost $ 700 in ten minutes. The remaining disabled suffered significant losses. Photo: Reuters

Extraordinary profit for those who risk in 2012
In the bond markets, much attention has been drawn to the decline in Greek ten-year bond yields below two percent, which happened for the first time in history. On Thursday, profitability was only 1938 percent, and thus less than the profitability of a comparable US bond, just over two percent. In other words: Greek public finances are less risky than US investors in the eyes of investors. Four years ago, the ten-year Greek bond yield was about 15%, and in March 2012, at the height of the European debt crisis, it was even 48%.

Investors are "warned" about Greek bonds
Recently, all European bonds, including the Greek ones, have risen sharply and therefore the required yield has fallen (in the case of Slovenia, it is hardly positive), as the ECB needs to pursue an even more stimulating monetary policy and perhaps re- purchase of bonds. ended in December. Investors, in the case of multiple bonds quoted at a negative interest rate, adhere to all profit opportunities even if they bind to a state whose public debt reaches 180% of GDP. Last Tuesday, Greece issued seven-year bonds worth 2.5 billion euros, with demand more than four times higher than the volume of the issue.

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