Tag Archive: Macroview

Bund yields-Heading further down?

Our central forecast is for Bund yields to rise (feebly) into positive territory by the end of this year, although risks are tilting to the downside.Four main factors have been driving down the 10-year Bund yield, which reached an all-time low of -0.26% on June 7. Considering changing circumstances, we have lowered our year-end target for the 10-year Bund yield from 0.3% to 0.1% and expect it to remain in negative territory until at least October...

Read More »

How dovish can Swiss monetary policy go?

The Swiss National Bank finds itself having to deal with an uncertain growth and inflation outlook as well as persistent external risks, but it is unlikely to pre-empt the ECB on interest rates.At its meeting on 13 June, the Swiss National Bank (SNB) will face an uncertain growth and inflation outlook. Economic data have been mixed and, more importantly, external risks (intensification of trade disputes, Brexit, Italian budget disagreements…) have...

Read More »

Oil prices are reeling

The escalation in trade tensions, the dimming of global growth prospects and a surge in US export capacity have pushed us to lower our oil forecasts.The recent plunge in prices suggests that oil is acting like a leading indicator of global economic growth, reflecting investors’ concerns that lasting trade disputes will dent future growth and risk pushing the world economy into recession.

Read More »

Why has euro inflation stayed so low?

Weak inflation data pose a conundrum, both in terms of the growth outlook and the ECB’s policy stance. We believe the ECB will stay on hold in 2020.The euro area headline flash Harmonised Index of Consumer Prices (HICP) dropped to 1.2% year on year in May from 1.7% the previous month.  Core inflation fell by 50bp to 0.8% y-o-y.

Read More »

A dovish Fed could become even more so

Trade, inflation expectations and economic data could well spark ‘insurance’ rate cuts by the Fed in the coming months.We now believe that the Federal Reserve (Fed) could deliver two ‘insurance’ rate cuts of 25bps in coming months (up to now, we expected rates to be on hold in 2019-2020). We see three drivers that could dictate the exact timing of these cuts:

Read More »

Avenues worth exploring in strategic asset allocation

The prospect of diminishing returns for classic, and previously highly effective, 60/40 portfolios (60% equities, 40% bonds) is leading to changes in strategic asset allocation. Efforts to improve prospects include identifying macroeconomic regimes to guide investments and refining how diversification is understood.

Read More »

European elections – a more diverse but still pro-Europe parliament

Voter turnout for European parliament elections surged across the continent, exceeding 50% for the first time in a quarter century and breaking the downward trend of the last four decades. However, differences in turnout across the EU have been substantial and a more fragmented parliament has emerged.Voter turnout was up for the first time ever and at 51%, higher than in any election since 1994. The results delivered a parliament with a...

Read More »

Rising downside risks to euro area growth

While our forecasts remain unchanged for now, external drags on growth prospects for the euro area look set to persist for longer than we had previously expected.A potential improvement in euro area growth in H2 2019 on the back of a revival in the global economy is in jeopardy due to the intensifying trade dispute between the US and China.

Read More »

Weakening Japanese momentum behind strong GDP figures

Japan’s latest GDP report reveals some notable weakness in the economy despite the strong headline figures.The preliminary reading of Japanese GDP for Q1 shows that the economy grew by 2.1% q-o-q annualised, beating the consensus forecast of -0.2%.However, behind the strong headline figures, details of the GDP report reveal some broad-based weakening in momentum.Declining corporate capex and sluggish household consumption both drag on domestic...

Read More »

Core sovereign bond yields – update

We are adjusting downward our year-end targets for the 10-year US Treasury and Bund yields.Taking hold of two important changes to our central macroeconomic scenarios, we are adjusting downward our year-end target for the 10-year US Treasury yield from 3.0% to 2.8% and the Bund yield from 0.5% to 0.3%. 

Read More »

French tax cuts designed to reboot Macron’s presidency

The French government’s respond to the ‘yellow vest’ protests could provide a meaningful boost to consumer spending, mostly next year.Following a series of townhall meetings with French citizens up and down France, President Emmanuel Macron responded to social unrest with two doses of fiscal easing.

Read More »

A spanner in the works

While Trump’s weekend tweets have created fresh uncertainties around US trade talks with China, some perspective is needed.At the weekend, US President Trump threatened to increase the tariff rate on Chinese imports as he believes that US-China trade negotiations are going “too slowly”. Importantly, Trump’s threats do not mean bilateral talks are breaking down. Indeed, the Chinese government confirmed today that its trade delegation would still go...

Read More »

Is Europe turning Japanese?

European investment opportunities remain, despite financial repression in the region.The European Central Bank (ECB) surprised market watchers with its dovish turn in January, wiping out any prospect of an interest-rate rise this year and revising its growth projections for the euro area downward for 2019.

Read More »

Peripheral bonds after the Spanish election

We remain underweight peripheral euro area bonds in general due to continued political uncertainty, which will feed volatility.On April 28, Spain held its third general election in less than four years. As was expected, the centre-left Socialists (PSOE) emerged the largest party, but it does not have an absolute majority, so negotiations with other parties will be needed.

Read More »

China: Q1 growth beats expectations

The Chinese economy grew at a faster rate than expected in the first quarter as policy stimulus effects kick in.The National Bureau of Statistics of China published Q1 GDP figures along with some key economic indicators for March. The data generally surprised on the upside. While we had previously flagged the upside risk to our earlier GDP forecast following the rebound in PMIs and strong credit numbers, the latest data releases still surprised to...

Read More »

Business cycle could define Trump’s re-election chances

President Trump’s focus on getting re-elected in November 2020 may have implications for his economic policy choices.As we move closer to the 2020 presidential election, Trump has been blatantly leaning on the Federal Reserve to be more accommodative and has been trying to appoint nominees who share his preference for loose monetary policy to the Fed board.

Read More »

Swiss Policy Mix Review

The Swiss federal budget is governed by a strict expenditure rule, which is enshrined in the Constitution. Since its introduction, the ratio of public debt-to-GDP has been significantly reduced, falling back to its early-90’s level. At the close of 2018, the Swiss federal budget registered a significant surplus of CHF 2.9 billion, compared with budget projections for a surplus of CHF 295 million.

Read More »

Switzerland: Lower growth, lower inflation

Growth and price rises should moderate in 2019.The Swiss economy posted impressive GDP growth in 2018, although there was significant divergence between strong growth in the first half and stagnation in the second. Overall, we expect Swiss GDP to expand by 1.3% in 2019, down substantially from 2.5% in 2018. Risks to our growth outlook for Switzerland are tilted to the downside.

Read More »

Limited room for Swiss franc depreciation

Even should global economic momentum stabilise in the coming months and political risks abate, the franc still has important structural underpinnings.The Swiss franc has been supported by a structural current account surplus and by reduced investment flows out of Switzerland since the 2008 financial crisis. In addition, the decline in global yields since the Fed’s dovish shift early this year has rendered interest rate differentials less...

Read More »

Getting ready for tiering

ECB officials have hinted at policy measures aimed at reducing the cost of negative rates for the banking sector, including a tiered system of bank reserves.Although back in 2016 the European Central Bank (ECB) ruled out tiering of bank reserves to mitigate the side effects of negative rates, the situation has since changed, and it could be implemented eventually if policy rates were to remain negative into 2020.

Read More »
Page 112345...Last »