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Yield Curve Inversion Signalling Recessionary Risks | Euro Area GDP Continues to Decline

Published August 14, 2019
  • The gap between US 2-year and 10-year yields dropped below zero after an onslaught of soft economic data, globally. Weaker than forecast Chinese retail sales and industrial output followed by data indicating that Germany’s economy is contracting has pushed bond markets to the edge. US 10-year yields dropped eight basis points to 1.62%, while those on 2-year treasuries fell three basis points to 1.63%. 30-year yields fell to a record low.
  • The US and China have taken measures to roll back from the abyss of a universally feared trade war. President Trump delayed the imposition of new tariffs on a wide variety of consumer products until December. Chinese officials are sticking to their plans to visit Washington in September for face-to-face meetings.
  • German gross domestic product contracted by 0.1% in the second quarter, which was very much in line with expectations. The fall in output was driven by a slump in exports as US-China tensions continue to have a major impact to export driven nations. Data also showed euro-area GDP growth slowing to 0.2% while industrial production plunged to the most in more than three years in June.
  • Former chancellor Philip Hammond has accused Prime Minister Boris Johnson of trying to diminish any opportunity of a new Brexit deal by making demands the EU could never accept. In a Times article recently published, the former chancellor stated that a no-deal Brexit would be “a betrayal” of the 2016 referendum result.

To the Clients of EncoreFX:

 

It is with much regret that we inform you that EncoreFX’s (the “Company”) offices are suspending trading effective immediately.

This suspension will give the Company time to consider its restructuring alternatives. The restructuring has become necessary as a number of customers to whom the Company granted credit have defaulted on their obligations to the Company due mainly, we believe, to the rapid changes in the FX market caused by the coronavirus pandemic.

 

In order to provide stakeholders with transparency, the Company has filed an assignment in bankruptcy pursuant to Section 49(1) of the Bankruptcy and Insolvency Act (Canada) (the “BIA”) with respect to its Canadian operations and has assigned its Australian and New Zealand subsidiaries in Voluntary Administration in Australia and New Zealand. 

 

Ernst & Young has been appointed as the licensed insolvency trustee (the “Trustee”) in Canada and as the Administrator in Australia. 

 

Once the Trustee, working with the Company, has determined the best options for the Company and its stakeholders it will share that information with you. Information pertaining to the bankruptcy of EncoreFX will be available, in due course, on the Trustee’s website at: www.ey.com/ca/encorefx.