Tag Archive: Macroview

French tax cuts designed to reboot Macron’s presidency

2019-05-10

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2019-05-10

French - Real GDP Growth, Q1 2016-Q1 2019
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.

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A spanner in the works

2019-05-08

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2019-05-08

MSCI China vs. Developed Market Equities - Relative Price Change, 2017-2019
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...

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Is Europe turning Japanese?

2019-05-03

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2019-05-03

German Bunds Yield, curve
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.

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Peripheral bonds after the Spanish election

2019-05-01

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2019-05-01

Spanish and Italian Government Budget Balances, 2006-2019
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.

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China: Q1 growth beats expectations

2019-04-21

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2019-04-21

Growth in Chinese Real GDP 2013-2019
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...

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Business cycle could define Trump’s re-election chances

2019-04-20

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2019-04-20

Trump's Approval Rates are Stable, 2016-2019
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.

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Swiss Policy Mix Review

2019-04-17

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2019-04-17

Swiss Government Debt, 1990 - 2018
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.

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Switzerland: Lower growth, lower inflation

2019-04-15

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2019-04-15

Swiss Quarterly GDP Growth, 2007-2018
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.

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Limited room for Swiss franc depreciation

2019-04-12

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2019-04-12

Swiss Goods & Services, Investment and Reserve Assets
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...

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Getting ready for tiering

2019-04-11

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2019-04-11

Aggregate Cost of Negative Policy Rates for Euro Area Banks, 2014-2019
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.

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China PMIs jump in March

2019-04-08

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2019-04-08

China Official and Caixin Manufacturing PMI, 2011-2019
Industrial gauges rebound on seansonality as well as policy easing.Chinese PMI readings moved back into expansion territory in March. The official Chinese manufacturing PMI rose to 50.5, up from 49.2 in February, and beating the Bloomberg consensus of 49.6, while the Caixin manufacturing PMI came in at 50.8, also up from 49.9 in February and beating the consensus expectation of 50.0.

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Oil prices supported by OPEC+ cuts…before market risks being flooded again

2019-04-05

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2019-04-05

World Oil Demand, 2019-2024
Increased US export capacity would probably force OPEC+ to change its current tactics.After last year’s collapse, oil prices have found support since the beginning of this year for several reasons. At this stage, the main question is whether the recent surge in prices is sustainable or whether we will see renewed oil price volatility, with the possibility of a repeat of 2018.

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Q&A on European Parliament elections

2019-04-04

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2019-04-04

European Institutions
European Parliament elections, to be held between 23 and 26 of May, will be a key political event in Europe. However, we expect limited short-term impact, given the European Parliament's limited ability to set Brussels' agenda.European Parliament (EP) elections will be a key political event in Europe, a form of ‘midterm election’ in which the electorates can state their approval or disapproval of their respective national governments. 

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Germany: signs of rebound ?

2019-03-26

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2019-03-26

German IFO Indices 2010-2019
German growth may remain subdued in H1 2019, before picking up somewhat in H2 2019 as some near-term risks dissipate.Germany’s leading indicator, the Ifo index, rose in March, driven by an increase in both sub-components: current assessment and expectations.

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Brexit update: UK parliament opts for an extension

2019-03-18

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2019-03-18

GBP/USD Exchange Rate 2018-2019
After an eventful week in parliament, the Brexit ball is set to keep rolling as MPs move to extend the 29 March deadline.The British Parliament concluded a series of votes on Brexit this week with an intention to extend the 29 March Brexit deadline. What remains unclear at this point is whether the UK will seek a short (two months) or a longer extension (two years).

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Euro slides against the dollar on ECB dovishness

2019-03-15

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2019-03-15

EUR-USD and 10-year Real Rate Differential 2014-2019
The euro has declined further against the dollar but should strengthen over next 12 monthsThe euro fell to a 20-month low against the US dollar following the European Central Bank’s (ECB) March policy meeting, given the revised forward guidance that suggests that the interest rate differential is unlikely to provide much upside to the euro in the next few months.

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ECB Forward Guidance: the Devil is in the Detail

2019-03-14

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2019-03-14

ECB Policy Rates, 2006 - 2019
Last week, the European Central Bank (ECB) announced a new long-term refinancing package for banks (called TLTRO-III) and made clear that interest rates would not be raised this year. While these measures were expected, they have come earlier than we thought.

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German Economy Set to Recover

2019-03-13

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2019-03-13

German Government Budget Balance, 2002 - 2018
Germany’s economy weakened significantly in the second half of 2018. External headwinds remain strong and, in an environment where monetary-policy ammunition remains limited, all eyes have shifted towards German fiscal policy, especially as the country has generated significant budget surpluses since 2011.

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ECB: to LTRO, or not LTRO, what is the question?

2019-03-06

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2019-03-06

Stylised policy options for new (T)LTRO
The ECB’s decision on (T)LTRO will matter most to the euro area periphery banks who have been the biggest consumers of current TLTROs. Considering the weakness in most economic indicators the ECB should maintain an adequate degree of monetary accommodation.

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GERMANY: ECONOMY & SOVEREIGN BOND

2019-02-26

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2019-02-26

German Bund, 2016 - 2019
A host of factors weighed on German growth in H2 2018: a sharp slowdown in global demand on the external side and several transitory factors on the domestic side impacted industrial activity. At the same time, the 10-year German Bund yield has been trending downward. The steep fall in the oil price in late 2018, the economic slowdown and the Bund’s safe haven status are all factors behind the German bund’s yield fall.

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