Market & Supply Watch - February 2016
The EBV Analysis of the Market Situation
The new year has started with a bang. Equity markets, oil prices and many emerging markets currencies have plummeted.
This is not so much due to disappointing Chinese economic data, but the fact, that investors are beginning to doubt whether the Chinese government can continue to successfully steer the economy. The beginning of the year has been a nightmare for China since the stock market decreased close to 20%. Most likely, this will have an impact on consumer spending. We have already seen that car sales are going down, especially for European (German) manufacturers.
Where could it go? There are certainly enough risk events that could move the economy in 2016: the US elections, various polls in Europe and Central Bank decisions, to name just a few. We also cannot forget a possible Brexit, where the UK will conduct a poll in June 2016 to decide if they would like to stay in the Eurozone.
On the other hand, consumer confidence all over Europe is positive and the interest rate, especially in Europe, seems to stay at very low levels. The US has started to increase the interest rate, however very moderately, since they usually do everything possible not to risk any harm to the GDP growth rate.
Oil prices and other commodities are also on multi-year lows. This is a definite benefit for Europe and other mature industries/countries. However, on the downside, it is heavily impacting countries like Brazil, Saudi Arabia, Norway because their budgets are becoming imbalanced and they have had to reschedule the investments in infrastructure.