ECB waits, economy stagnates, Johnson keeps pound from growing

At yesterday’s meeting, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged. So Draghi can leave with a sense of accomplishment, but his successor Christine Lagarde will have to solve a challenging task - how to stimulate the economy if rates are lower than zero.

Yesterday's macroeconomic statistics has been psyching negative thoughts out. The composite PMI index in Germany is below 50 and worse than forecasts, the similar index in the Eurozone as a whole turned out to be above 50, but it came out worse than forecasts, and its recessive values remained only - 0.2. Orders for durable goods in the United States fell by 1.1% m / m in September (forecast: -0.7% m / m), while composite PMI in the United States, although it reached 51.20, is still worse than analysts' forecasts.

In general, the economy continues to generate signals in favour of stagnation. Recall recent data on manufacturing activity in Japan, which reached its lowest level over the past 3 years, or China's GDP, which has reached thirty-year lows.

Returning to the ECB and its negative rates, I would like to note that regulators are one step away from being stuck when traditional instruments of influence on the economy go off, but there is nothing to replace with. In general, the threat of a global economic catastrophe from a hypothetical opportunity may well become a reality.

Well, we recall that during periods of crisis, the investment strategy needs to be radically adjusted: replace investments in stocks with investments in bonds, increase cash in the portfolio and spend part of facilities on the purchase of safe-haven assets.

In this light, we continue to recommend buying gold and the Japanese yen.

Speaking of threats. Boris Johnson continues to stop the pound from growing. His intention to hold early elections in December is becoming real. On Monday, this issue will be put to a vote in Parliament. And if the EU by that time manages to agree on a postpone on Brexit, then the opposition is ready to vote “in favour”, which means that early parliamentary elections are waiting for Britain in December.