There is little to cheer about this week. Geopolitical risk spiked as Russia retaliated with bans on fruit and vegetables from the West, President Obama unexpectedly authorized airstrikes in Iraq as the militants move toward American diplomatic outposts, and the cease-fire was ended in Gaza. So much for market fundamentals.

As a result of all the geopolitical turmoil that is going on, volatility spiked. The only exception was the volatility of Treasury bonds, but that is perhaps no real surprise given the fact that yields are moving downwards almost consistently.

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And what to say about the German bond yield? The economic impact of the sanctions on and by Russia becomes more visible by the day, pushing the yield on 10-year government bonds towards 1%. On Thursday I made a somewhat sarcastic remark that the 1%-threshold could be broken today, but with a low today of 1.023% actually comes pretty close.

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At the same time investors decided to get rid of their peripheral bonds, with a sharp increase in spreads as a result. The whole Banco Espirito Santo issue does not make things better, either.

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Talking about Portuguese Banks, just take a look what they did to the Portuguese stock index. It has lost almost 30% since the end of March. Yes, that is 30%.

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Things do not look much better in a fellow peripheral. Italy’s GDP shrunk 0.2% in the second quarter, were a marginal plus of 0.1% was expected. Compared to the same period a year ago Italy’s GDP is 0.3% smaller. And to say that things look better going forward, would require a very optimistic state of mind.

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Away with all that pessimism. For more positive news, the United States are the place to be. The ISM non-manufacturing came in at 58.7 in July, more than two points higher than expected, and the highest since December 2005.

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And what to think of the initial jobless claims. The 4-week rolling average of jobless claims has reached an eight-year low, a clear sign that the job market remains strong.

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Also impressive were the results of the latest Fed Senior Loan Survey. Quote; ‘The July survey results showed a continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand.’

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What does this mean for the Fed policy? Yellen will remain comfortable with the pace of tapering for now, ending active QE in October. Based on fundamentals, for what it’s worth, there is a small chance Yellen has to move forward the first rate hike a little earlier. This week the Citi US Inflation Surprise Index rose above zero for the first time since November 2011.

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So much for now. I opt for a ‘warless’  next week.