Tag Archive: Macroview

Powell plays the ‘insurance’ card again

2019-09-19

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2019-09-19

The Market Continues to Distrust the FED Dot Plot, Which Shows no Additional cut, 2018-2021
In spite of internal divisions, the Fed may go for a third rate cut in October and step in to alleviate pressure in repo market.The Federal Reserve (Fed) cut rates by 0.25% on Wednesday, as widely anticipated. The new fed funds target range is 1.75%-2.00%. The interest rate on banks’ excess reserves was cut by 0.30% to 1.80%.

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Oil prices and the global economy

2019-09-11

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2019-09-11

Oil Prices, 2018-2019
Low oil prices are good news for disposable income. But they also reflect the risk of oversupply in a world where growth indicators continue to point down.Events since Trump first threatened increased tariffs in 2017 provide a textbook example of how tariffs are transmitted through the global economy. First, the uncertainty they create hurts sentiment.

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Swiss National Bank – Between a rock and a hard place

2019-09-10

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2019-09-10

Swiss Quarterly GDP Growth, 2011-2019
We expect the Swiss National Bank to stay on hold at its next policy meeting, but a lot will depend on ECB and Fed meetings.Uncertainties and global slowdown are weighing on business investment in Switzerland, while household consumption growth has been slowing. Swiss GDP rose by 0.3% q-o-q in Q2 (down from 0.4% in Q1), mainly due to spending in healthcare, housing and energy.

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Brazilian real stands out in EM currency scorecard

2019-08-21

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2019-08-21

EM FX Scorecard, August 21
Prospects for emerging-market currencies look cloudy. The currencies of countries with sound external buffers and limited exposure to global trade should fare relatively better than others.In recent months, the global environment has become more challenging for EM currencies. Trade tensions have increased and are weighing on economic activity. Commodity prices have also fallen.

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Emerging market sovereign debt update: yields are falling

2019-08-19

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2019-08-19

Inflation and Policy Rates Average in Some EM, 2012-2019
Yields have fallen significantly in the EM sovereign bond space in local currency; USD movements will be key to watch for going forward.Yields have fallen impressively in the emerging market (EM) sovereign bond space in local currency, reaching 5.3% on 16 August, near their all-time low of 5.2% (in May 2013). This downward movement has been partly driven by the recent policy rate cuts of some EM central banks.

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Italy: Back to polls in Q4 2019?

2019-08-17

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2019-08-17

Italy: Key Upcoming Dates, 2019
Recent developments in Italy’s political landscape have increased the probability of early elections in Q4 2019, but the situation is not so straightforward. Last week, political tensions in Italy intensified as Matteo Salvini, the League’s leader triggered a no confidence vote against Prime Minister Giuseppe Conte.PM Conte will address the Senate on 20 August.

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New monetary policies for new challenges

2019-08-16

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2019-08-16

Towards a New Monetary Policy Style, 1981-2029
As central banks try (yet again) to bolster faltering growth and inflation, it is important to grasp how the ‘style’ and aims of monetary policy-making have changed over time and how they need to evolve in the future.The world is being disrupted by structural trends such as populism, demographic and climate change and technological innovation.

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Developed market equities update: a fairly reassuring reporting season

2019-08-13

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2019-08-13

August’s Equity Sell-off’s Magnitude Looks Like May’s, but was Much More Rapid
There is an ongoing tug-of-war between trade tensions and fundamentals Due to renewed trade tensions, the S&P 500 corrected by 6.0% and the Stoxx Europe 600 by 5.8% from the late July peak to the 5 August low. Because the pullback was clustered around just a few days, its intensity was reminiscent of the worst market days of past major crises.

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Update on gold – bad news is good news

2019-08-12

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2019-08-12

Gold Price vs US 10-year Real Rates, 2012-2019
Increased trade tensions have boosted the gold price to above USD 1,500.The increased trade tensions following Trump’s 1 August tweet threatening additional tariffs on Chinese goods has boosted the gold price above USD 1,500 per troy ounce.The recent developments are supportive of gold investment demand because of a lower opportunity cost associated with holding gold and greater demand for safe haven assets.

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The US labels China a currency manipulator

2019-08-10

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2019-08-10

USD/CNY Spot Rate, 2000-2019
The near-term impact will likely be limited but this is a clear negative for trade negotiations.Shortly after the renminbi’s sharp depreciation on Monday, the US Treasury Department labelled China a currency manipulator. This is the first time in 25 years that the US government has designated a country as a currency manipulator.According to the US Treasury Department, the decision was triggered by the perceived lack of action by the PBoC to resist...

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Currency update – the Chinese renminbi

2019-08-09

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2019-08-09

Growth in Japanese Exports and ISM Business New Orders Index, 2011-2019
Despite the CNY's recent fall, we believe the People's Bank of China will refrain from competitive devaluationFollowing US President Donald Trump’s announcement of a new 10% tariff on USD300 billion of Chinese goods, the Chinese renminbi (rmb) weakened sharply and breached CNY7.00 per USD.

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BoJ stays put amid economic headwinds

2019-08-07

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2019-08-07

Growth in Japanese Exports and ISM Business New Orders Index, 2011-2019
Japan's central bank has little room for further easing despite a downbeat outlook.At its monetary policy meeting on 30 July, the Bank of Japan (BoJ) decided to keep its monetary policy unchanged, as expected. The decision came as the Japanese economy faces strong external headwinds and a downbeat outlook for domestic demand.

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DATA ADDS TO THE CASE FOR ECB ACTION IN SEPTEMBER

2019-08-01

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2019-08-01

Euro Area Real GDP Growth, 2013-2019
Slowing economic momentum in the euro area means that we are lowering our GDP forecasts for this year. The euro area economy grew by 0.2% q-o-q in Q2, down from 0.4% in Q1.While 0.2% is still a decent pace of growth, concerns about the economy in the second half of the year have increased. Recent data have shown that the industrial slump has started to leave some marks on the domestic economy.

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BREXIT UNCERTAINTY TO WEIGH ON YIELDS

2019-07-26

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2019-07-26

UK 10-YEAR Gilt Yield Breakdown and Forecast, 2014 - 2019
UK sovereign bond (gilts) yields have fallen this year, with the 10-year yield dropping by 59 basis points (bps) to 0.69%1, in concert with other core sovereign bond yields. The Brexit saga, along with the global slowdown forcing many central banks to turn dovish, are the main factors behind this steep fall.

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DM credit caught between opposing forces

2019-07-24

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2019-07-24

EURO AND US IG CREDIT SPREADS
Despite the impressive year-to-date performance of corporate credit, we remain prudent about prospects in the remainder of 2019.Corporate bonds have posted stellar total returns year to date, thanks to the positive combination of lower sovereign yields and tighter credit spreads.

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World growth forecast revised down

2019-07-24

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2019-07-24

World Real GDP Growth, 1985-2019
Signs of a potential global recession are appearing, such as a fall in fixed investment and industrial production and a build-up in unwanted inventories. We are revising down our world growth forecast.The effects of a negative shock dating back to early 2018 are still being propagated throughout the world economy.

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Semaña grande for Sánchez

2019-07-23

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2019-07-23

Spain Generic Government 10Y Yield, 2015-2019
The interim Spanish prime minister, the socialist Pedro Sánchez, will aim to form a government this week. Outside the political noise, the Spanish economy continues to do well.April’s elections in Spain resulted in a fragmented parliament, making the formation of a government complicated.

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Euro area manufacturing is not out of the woods

2019-07-19

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2019-07-19

Euro Area Industrial Production, MoM 2019
Industrial production rebounded in May. But a closer look shows that the improvement was narrowly spread, and euro area manufacturing faces numerous challenges ahead.After two consecutive months of contraction, euro area industrial production (IP, excluding construction) rose by 0.9% month on month (m-o-m) in May, above consensus expectations.

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US FX intervention still someway off

2019-07-19

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2019-07-19

US Dollar Overvaluation According to OECD Purchasing Power Parity, 1971-2019
The likelihood of active FX intervention by the US authorities remains low but is increasing and the Trump administration can be expected to continue to pressure the Fed to cut rates.The Trump administration has been focusing on the US’s trade deficit with some of its main trading partners such as China and Germany. A strong dollar is exacerbating this deficit and has visibly exasperated President Trump.

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China: Q2 growth lowest in decades

2019-07-17

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2019-07-17

Growth in Real Chinese GDP by Sector, 2010-2019
Downward pressure on growth persists amid ongoing trade tensions.Chinese real GDP growth came in at 6.2% year-over-year (y-o-y) in Q2, down from 6.4% in Q1, and the lowest quarterly growth in over two decades.The tertiary sector (mainly services) continued to lead growth, expanding by 7.0% y-o-y in Q2, the same as in Q1.

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