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The recent declines in global markets have wiped out three-quarters of global trade, US bank JP Morgan said. the benefits Globalism.
Carry trade is a trading strategy that involves borrowing at a low interest rate and investing in an asset that offers a higher rate of return. It usually involves borrowing in a currency with a low interest rate and converting the borrowed amount into another currency. The proceeds are deposited in the second currency if it offers a higher interest rate.
wipe out revenue
Yields in emerging markets and global carry trade baskets the bank tracks have fallen by about 10% since May, wiping out current-year revenues and significantly reducing accumulated profits since the end of 2022, the bank’s strategists Antonin Delaire, Meera Chandan and Kong Bad wrote in a note to clients, part of which was reported by Bloomberg.
A wave of declines hit global markets at the end of last week and the beginning of trading this week due to weaker-than-expected US economic data.
The US Department of Labor reported last Friday that the rate The unemployment It rose to 4.3%, as employers added 114,000 jobs in July, a weaker-than-expected performance.
With the unemployment rate currently at its highest level since the exit from stagnation Pandemic-induced 2021 Economists, banking analysts and investors have warned that signs of a recession are becoming more apparent.
volatile trade
The interest rate trade has been volatile for months, and took a severe hit over the past week as global market volatility increased, amid fears of a rapid rate cut by the Bank of US Federal Reserve (Central Bank) After raising interest rates by the Bank Japan More than expected.
Strategists said there was little chance of the carry trade recovering in August, noting that it “does not offer an attractive risk reward. The basket yield has declined since its 2023 highs and is not sufficient compensation for maintaining high levels of risk in emerging markets during the US election.”
