"Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics,” said Rabobank strategist Michael Every.
Share markets fell for a third straight day on Tuesday as fears about a drawn out global trade war, protests in Hong Kong and a crash in Argentina’s peso currency kept investors huddled in bonds, gold, and the Japanese yen for safety.
Investors were also still assessing the wider damage caused by Monday’s crash in Argentina after its President Mauricio Macri became the latest pro-free market, pro-reform leader to be given a beating at the polls by a populist rival.
The response was brutal. The peso collapsed 15%, equities crumbled 48% in dollar terms —the second biggest one-day slump anywhere since 1950— and the bond market crashed, with a 100-year bond that investors had recently gobbled up tumbling 20% as fears of yet another government default spiked.
“Yes, Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics,” said Rabobank strategist Michael Every.
He added the “wall of worry” also now includes: the trade war, Brexit, China, Hong Kong, Iran, Italy, Kashmir, North Korea, South China Sea, Turkey, and Venezuela. “Did I miss anything with tired eyes?”
With so much uncertainty around, Europe’s traditional safety play, the 10-year German government bond, saw yields hit a new record low.
Equivalent U.S. Treasury yields were straining for their lowest in almost three years, gold was pinned close to six-year highs and the yen was within a whisker of a seven-month peak versus the dollar.