An interesting report on Bloomberg this week looks at Italy and their outstanding corporate bond debt. Corporate bonds outstanding total Euro172bln and financial bonds outstanding total Euro 252bln so all sectors total Euro 423 Bln.

We have long warned about our concerns over the Italian banking sector and would not be holding any Italian debt at this juncture; however, many others do for so little reward.

Weakening global economic data and concern about the negative fallout from a trade war between the US and China continued driving another wave of risk-off sentiment across markets. German GDP slipped into negative territory in 2Q falling 0.1% QoQ raising the risk that the economy falls into recession (i.e. two consecutive quarters of falling growth).  China’s weaker July data releases also added to concerns about the growth outlook: for example, fixed asset investment slowed to 5.7% yoy for the 7 months of the year and July industrial production growth slowed to 4.8% yoy from 6.3% yoy.

In a rerun of a familiar saga, Argentina’s default probability jumped back above 75% (5 years) following a primary election upset that blindsided most of the market. Former man of the moment, Argentina’s President Mauricio Macri, was defeated by Alberto Fernández and his running mate former President Cristina Fernandez de Kirchner in yesterday’s vote – by 32% to 47% – causing a large volume of sell-offs in the country’s debt and instantly doubling credit default swap prices.

Over the last few days, economists at both Morgan Stanley and Goldman Sachs have warned that the chances of a recession have increased as the ongoing trade wars are going to have a larger impact on the global economy than first thought.

At Morgan Stanley, their chief economist, Chetan Ahya, said that the firm believes a global recession will come in about 9 months if the trade disputes continue to escalate, with the Trump administration raising tariffs top 25% ‘on all imports from China for 4-6 months’ …..