The main point of interest for investors during the past week was the further deterioration of the financial situation of China's second largest residential developer Evergrande. Judging by the company's share and bond prices, bankruptcy seems an increasingly likely option. The main risk is that the collapse of Evergrande could drag other Chinese companies down with it and put the entire Chinese banking sector under significant pressure. Let us add that Evergrande's total debt is around $300 billion. As a result, we saw another slight increase in risk aversion in global financial markets last week.
As for the stock markets, they again posted slight losses. The MSCI All Country World, the broadest global equity index, wrote off 1.0% and probably the most followed equity index, the US S&P 500, wrote off 0.6%. Central European equity markets, as measured by the CECEEUR index, wrote off 1.0%.
Bonds also weakened slightly again. The broadest global bond index, the Bloomberg Barclays Global Aggregate Bond, shed 0.5%, while the average global bond yield to maturity rose 0.03 percentage points to 1.09%. In real inflation-adjusted terms, the average global bond yield to maturity remains deeply in negative territory at -3.2%. The Czech government bond index posted a loss of -0.6% last week. The yield to maturity of the Czech government bond with a long 10-year maturity rose by 0.09 percentage point to 2.02%. Global corporate bond indices also posted modest losses.
On the other hand, commodities did relatively well. The S&P GSCI Global Commodity Index gained 1.5%. The price of the barrel of the North Sea Brent rose by 3.3% to USD 75. Gold, on the other hand, weakened by 2.3% to USD 1,749 per troy ounce.
US dollar strengthened again last week. The dollar index DXY, which measures the dollar's performance against a basket of other major currencies, gained 0.7%. Against euro, dollar strengthened by 0.8% to 1.173 USD/EUR. Koruna weakened by 0.5% against dollar to 21.47 CZK/USD and remained flat against euro at 25.30 CZK/EUR.
Investment Strategist at Conseq Investment Management, a.s.