FINANCIAL ANALYSIS
by Chris Weafer
“Try not to worry…take each day just one anxiety attack at a time”
Anon
There continues to be only one key event in global markets and that is the US debt deal. As this note goes out, there is optimism that a deal will be reached either this evening or tomorrow. That should allow for a modest relief rally in global markets, albeit the long drawn out process has severely undermined confidence and exposed more serious issues in the US. Along with continuing threats in the eurozone sovereign debt market, investors have little reason to be cheerful and most will be fearful that the same concerns will dominate market sentiment in the autumn-winter period. The relief rally, therefore, will be more of a "the patient didn't die but remains in critical care"
Regardless of the debt deal, there is still a high risk that S&P, and other rating agencies, will cut the US credit rating from AAA status. S&P placed the rating on Creditwatch on July 14th and said that apart from a debt deal it needs to see a "credible solution to the rising U.S. government debt burden". A rating cut will not come as a surprise to the markets but it will act as a restraint against any early optimism that recent problems can be left behind when the new "investment season" starts after US Labor Day in early September.
The full note, with this week’s market diary, stock watch, Russia update (economy, social, politics, market reforms), oil comment, weekly funds flow analysis, and tables showing the best and worst share performance of last week and year to date, can be downloaded Download Russia_Week_Aug_1_11.
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