Category Archive: 2) Swiss and European Macro

Main Author George Dorgan
George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

European Central Bank likely to stick to script

The ECB is comfortable with current market expectations for rate hikes.At its latest meeting in December, the ECB turned more cautious, lowering its growth forecasts but showing no sign of panic regarding the loss in euro area economic momentum. Risks were considered as “broadly balanced”, but moving to the downside.

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Swiss Producer and Import Price Index in December 2018: +0.6 percent YoY, -0.6 percent MoM

18.01.2019 - The Producer and Import Price Index fell in December 2018 by 0.6% compared with the previous month, reaching 102.5 points (December 2015 = 100). Compared with December 2017, the price level of the whole range of domestic and imported products rose by 0.6%. The average annualised inflation rate in 2018 was 2.4%.

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Outlook for euro periphery bonds

Economic fundamentals should come back into focus, but politics still a factor.After a year when peripheral countries’ old demons made a reappearance, with, in particular, Italy’s public debt back in the spotlight, the focus should shift to economic fundamentals in 2019. Both the Spanish and Italian economies are set to slow down, although the situation is more serious in Italy.

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Concerns about Italy have not gone away

Rome and Brussels reached a compromise on the Italian government’s budget plans last month. But there are plenty of reasons for thinking this will be a challenging year for Italy.After battling for more than two months over a 2019 budget plan defiantly non-compliant with the EU fiscal rules, Rome and Brussels struck a last-minute agreement in December that avoided opening an Excessive Deficit Procedure (EDP).

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UK Politicians remain stuck in the mire

Next week’s vote on the divorce deal is likely to be defeated, and there is precious little time for an alternative before the Brexit deadline in March.The British parliamentary vote on Theresa May’s EU divorce deal will be on 15 January. The deal is likely to be rejected, as there has been little progress since December, when a first vote was called off for lack of support.

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Germany is Stagnating

Sagging industrial production and confidence figures point to weak Q4 GDP. German industrial production (including construction) fell by 1.9% month-on-month in November, extending the sector’s decline to five out the six last prints. Year on year, industrial production was down by 4.6%, the worst performance since November 2009.

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…And Get Bigger

Just as there is gradation for positive numbers, there is color to negative ones, too. On the plus side, consistently small increments marked by the infrequent jump is never to be associated with a healthy economy let alone one that is booming. A truly booming economy is one in which the small positive numbers are rare. The recovery phase preceding the boom takes that to an extreme.

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Euro Credit: 2019 Outlook

Last year was a difficult one for euro credit, with both the ICE Bank of America Merrill Lynch (ICE BofAML) investment grade (IG) and high yield (HY) indices posting negative total returns. This was entirely due to wider credit spreads, as medium-term German government bonds yields fell slightly.

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Swiss Consumer Price Index in December 2018: +0.7 percent YoY, -0.3 percent MoM

09.01.2019 - The consumer price index (CPI) fell by 0.3% in December 2018 compared with the previous month, reaching 101.5 points (December 2015 = 100). Inflation was 0.7% compared with the same month of the previous year. The average annual inflation reached 0.9% in 2018.

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Swiss Retail Sales, November 2018: -0.2 percent Nominal and -0.5 percent Real

Turnover in the retail sector fell by 0.2% in nominal terms in November 2018 compared with the previous year. Seasonally adjusted, nominal turnover rose by 0.2% compared with the previous month.

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Core Euro Sovereign Bonds 2019 Outlook

In our central scenario, we expect the 10-year Bund yield to rise gradually to 0.8% by the end of next year from 0.26% on 17 December. Underpinning this upward movement is our expectation of a cumulative deposit rate hike of 40 basis points (bps) by the ECB, against current market expectations of only 10 bps.

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Construction prices rose by 0.3 percent in October 2018

The construction price index recorded a rise of 0.3% between April and October 2018, reaching 99.3 points (October 2015 = 100). This result reflects a greater increase in civil engineering prices than in building prices. Year on year, construction prices increased by 0.6%.

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Swiss Trade Balance November 2018: Exports pass for the first time the bar of 19 billion francs

In November 2018, exports confirmed their growth the previous month with a 1.8% increase, posting a new monthly peak. Imports, on the other hand, weakened by 1.2% and remain in a negative spiral. The trade balance closed with a surplus of 3.1 billion francs.

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Pension fund statistics 2017: definitive results

The pension funds can look back on a positive year of investment: net income from investments doubled in 2017, strengthening the reserves and reducing any underfunding. These are some of the final results from the Federal Statistical Office’s 2017 pension fund statistics. You will find further information such as tables and graphs in the PDF below.

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ECB: Still Broadly Confident, but Caution Increasing

The ECB kept its key rates unchanged (i.e. the main refinancing at 0.00%; the marginal lending facility rate at 0.25% and the deposit rate at -0.4%), in line with consensus. The ECB’s forward guidance on interest rates was kept unchanged. The ECB expects its policy rates to “remain at their present levels at least through the summer of 2019”.

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Swiss Producer and Import Price Index in November 2018: +1.4 percent YoY, -0.3 percent MoM

The Producer and Import Price Index fell in November 2018 by 0.3% compared with the previous month, reaching 103.1 points (December 2015 = 100). This decline is due in particular to lower prices for pharmaceutical products. Compared with November 2017, the price level of the whole range of domestic and imported products rose by 1.4%.

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EU Recession Imminent – Euro Disunion as Brexit, Italy and End of QE Loom

Someone asked recently how many times I had “crossed the pond” to Europe. I really don’t know. Certainly dozens of times. It’s been several times a year for as long as I remember. That makes me an extremely unusual American. Most of us never visit Europe, except maybe for a rare dream vacation. And that’s okay because our own country is wonderful and has a lifetime of sights to see.

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‘Paris’ Technocrats Face Another Drop

How quickly things change. Only a few days ago, a fuel tax in France was blamed for widespread rioting. Today, Emmanuel Macron’s government under siege threatens to break its fiscal budget. Having given up on gasoline and diesel, the French government now promises wage increases and tax cuts.

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ECB Preview: an end to net asset purchases

With the ECB’s asset purchases due to end this month and forward guidance set to remain unchanged, a focus at next week’s policy meeting will be staff forecasts for growth and inflation. At its Governing Council meeting next week, we expect the European Central Bank (ECB) to confirm that its asset purchases will cease at year’s end.

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Yellow vest protests cast cloud over Macron’s reform plans

Recent protests could have a negative impact on French growth, tax revenue and president Macron’s reform plans for his country and for Europe. French protests began on November 17 over hikes in fuel taxes, but have progressively broadened out into an expression of general anger with the French government about the cost of living and high taxes.

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