RBS Bank
22:15
RBS TELLS TRADERS, ‘SELL EVERYTHING’
RBS TELLS TRADERS, ‘SELL EVERYTHING’
London RBS has advised traders to "sell everything" in an alarming research note that warns of a global deflationary crisis.
That would mean prices start to decline, creating a vicious cycle where people hang onto their money rather than invest it in the economy.
"Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small," RBS said in a note to clients. RBS said that major stock markets could fall by a fifth and that oil may plummet to $16 a barrel.
Oil flirted with $30 a barrel on Tuesday in lows not seen for over a decade. Morgan Stanley, the American investment bank, said that Brent would slide further to $20 a barrel on currency alone, because the dollar is gaining in value, and oil is valued in dollars. Oil has already lost 11 per cent of its value so cent of its value so far this year.
Chinese deflationary fears are weighing on investor sentiment. Trading of Chinese shares was halted twice last week when an automatic circuit breaker kicked in following losses of 7 per cent. China then removed the circuit breaker over fears it was making the situation worse. China shares suffered another brutal start to the week on Monday, dropping a further 5 per cent. RBS said that China was at the centre of global stress. "As China slows, as it now is doing now that the credit binge comes home to roost, it is taking the world with it. This is your number one theme for 2016, without any question in my mind," Andrew Roberts, part of the interest rate team at RBS, said in the note. Roberts' team first warned about another slowdown in November. It said the US Federal Reserve's decision to raise interest rates had hastened the decline. Paras Anand, head of European equities, said the RBS note was worrying but symptomatic of a broader shift to pessimism.
