August in the financial markets
Friday, 04 of September 2015
The month of August was marked by the consequences that caused the devaluation of the yuan (nearly 5% against the USD) that conducted the Central Bank of China. This resulted in massive outflows in the Chinese equity markets triggering falls close to 9% on Monday 24 (or black Monday).
The contagion was immediate in emerging countries after the fall in the price of raw materials causing these economies were required to carry out devaluations in their currencies.
The situation also resulted in losses at major US and European stock markets as well as increased volatility in major financial markets worldwide to worsen the uncertainty about the slowing Chinese economy.
Concerning macroeconomic data of the month, we emphasize on the bad US data released both leading indicators of activity and the survey on ADP non-farm employment change, which could affect the decision on EDF rate hike.Equity Markets
The performance of equities in the last month in different countries has been characterized by significant declines that have suffered major indexes. As the chart shows, the losses in equities in the euro zone have been higher than the maximum loss estimated returns one month ahead.
The returns have been negative in the main European indices, becoming up to -10% for the German Dax and the Eurostoxx 50. The trend was the same in both the US and key Asian markets.
Fixed Income Markets
The convertible debt during the month of August continued the downward trend, again being affected by developments in equity, incurring losses with a yield of -3.4% (monthly average value below the + 0.5%).
The trend was also negative in the corporate debt one month ahead with a yield of -0.56%. If we look at the perspective of three months, the yield was -2.40% compared to the average of + 1.2%.
Usually the month was also negative in the bond market, harmed by events worldwide.
In the currency market we include the depreciation of the yuan against the dollar after the devaluation of the currency held by the Chinese authorities.
The EUR / USD has fluctuated over the month between 1.0884 and 1.1622 EUR / USD, mainly affected by the publication of economic data in the US and the interpretation of the market in terms of the impact this could have on the Fed decision on interest rates.
Monthly Market Summary