(Il Sole 24 Ore Radiocor) – A few clouds are once again appearing on the horizon for the financial markets, amid ongoing tensions in the Strait of Hormuz and a fresh rally in oil prices, alongside fears over inflation and pressure on government bonds. According to the Assiom Forex survey, conducted in August amongst its members in collaboration with Il Sole 24 Ore Radiocor, the proportion of those who believe that stock markets will not fall from current levels over the next six months is dwindling (from 75 per cent in July to 65 per cent). In particular, 35 per cent (up from 25 per cent) expect share prices to fall, compared with 26 per cent (down from 31 per cent in July) who forecast a rise. For 39 per cent (down from 44 per cent), share prices will remain stable until February 2027. “The August survey highlights a slight deterioration in investor expectations regarding the stock markets, following the gradual recovery in confidence recorded in previous months, against a backdrop of virtually unchanged performance in Italian and European indices,” comments Massimo Mocio, president of Assiom Forex.
No flight from risk for the time being
According to the majority of market participants surveyed, the strong pressure on the bond market and concerns over rising US debt will not, at least for the time being, trigger a widespread flight from risk. “The rapid rise in US Treasury yields and the accompanying concerns about the sustainability of US public finances have brought the issue of a possible rotation towards assets considered safer back into the market’s spotlight,” notes Mocio. However, 70 per cent of Assiom Forex traders believe that any shift towards safe-haven assets, such as gold, is likely to be limited. “Traders do not, in fact, see the conditions for a widespread flight from riskier assets, in the absence of a further deterioration in the US fiscal situation.” The remaining opinions are divided between two extremes: 15 per cent of those surveyed believe that a further deterioration in public finances could trigger a rapid shift towards safe-haven assets, whilst another 15 per cent consider fears regarding fiscal policy to be premature and do not expect any significant shifts towards defensive assets.
Pressure on yields does not dampen optimism regarding the BTP-Bund spread
Consensus amongst Assiom Forex traders regarding a stable BTP-Bund spread remains very strong, despite the rise in government bond yields globally. 77 per cent of respondents (up from 75 per cent in July) expect a spread between Italian and German government bonds of between 50 and 100 basis points over the next six months (up to February 2027). For 20 per cent, in line with the previous survey, the spread will move within a range of 100 to 150 basis points, whilst only 3 per cent (down from 4 per cent the previous month) expect a spread of between 150 and 200 points.
Bets on the euro appreciating are on the rise, but stability prevails
There is a growing belief amongst financial market participants that the euro/dollar exchange rate will rise, a view now also supported by the ECB’s second interest rate rise, although the majority continue to expect the exchange rate to remain stable over the coming months. 58 per cent of respondents, in line with the previous month’s survey, expect the current balance of power between the two currencies to remain unchanged. However, the proportion of traders expecting the single currency to strengthen has risen to 35 per cent (from 25 per cent in July), whilst expectations of a weakening have fallen significantly to 7 per cent from the previous 18 per cent. “In the foreign exchange market, the euro strengthened marginally against the US dollar last month,” comments Mocio. “From 1.152 at the start of August, the exchange rate closed the period at 1.162, close to the high of 1.168 reached on the 21st. Expectations of stability in the euro-dollar exchange rate prevail for the next six months”, explains the president of the association of financial market operators.
