Tag Archive: Macroview

Buying more time

2018-06-27

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2018-06-27

Swiss Headline Inflation and SNB Inflation Forecasts, 2000 - 2018
At its quarterly monetary policy assessment last week, the Swiss National Bank (SNB) kept unchanged the target range for the three-month Libor at between -1.25% and -0.25% and the interest rate on sight deposits at a record low of -0.75%. The SNB reiterated its willingness to intervene in the foreign exchange market if needed.

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Rise in Bund yield will be limited

2018-06-22

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2018-06-22

Euro Area Composite PMI and Germany 10-year Bund Yield, 2015 - 2018
With the faltering in euro area business sentiment since February, the Italy-led sell-off of risk assets at the end of May and the European Central Bank’s (ECB) dovish meeting in June, we are revising our year-end forecast for the German 10-year Bund yield from 0.9% to 0.6%, as we hinted we might do in a previous note.

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European cars at a crossroad

2018-06-18

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2018-06-18

European Union: New car registrations 2010-2018
Falling momentum in new car sales, together with the threat of US tariffs is adding to the uncertainty facing the European car industry.Last weekend’s G7 summit in Canada ended badly, with President Trump withdrawing his support for the summit’s final statement. Heightening tensions between Europe and the US are Trump’s hints that the White House is considering import tariffs on cars and car parts.

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ECB gets ready to make the leap

2018-06-12

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2018-06-12

ECB Policy Rate, Jan 2018 - June 2018
The ECB has had essentially two options going into the June meeting: either a dovish decision but a hawkish communication (hinting at an imminent QE tapering), or a hawkish decision but a dovish communication (counterb alancing a tapering announcement with dovish sweeteners).

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Europe chart of the week-German new orders

2018-06-11

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2018-06-11

Germany: three measures of new factory orders 2011-2018
German new orders were weak across the board in April, contracting for a fourth consecutive month and by a larger-than-expected 2.5% m-o-m following a downwardly-revised 1.1% drop in March. As a result, total manufacturing orders are off to an extremely weak start in Q2 (-3.3% q-o-q after -2.2% q-o-q in Q1). What is more, the decline in demand for German goods in April was fairly broad-based across countries and sectors.

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Europe chart of the week – Spanish growth

2018-06-05

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2018-06-05

Spain GDP and EC Economic Sentiment Index, 2006 - 2018
This week saw the final release of Spanish GDP growth for Q1. The economy again managed to post robust growth, the highest among the four largest euro area economies (+0.7% q-o-q versus 0.4% q-o-q for the euro area). The breakdown of figures showed that domestic demand was once again the main growth driver.

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Euro area inflation close to ECB target in May

2018-06-03

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2018-06-03

Euro Harmonised Index of Consumer Prices Inflation and ECB Staff Projections
Today’s release of euro area flash HICP surprised to the upside both in terms of headline inflation (which surged from 1.2% to 1.9% y-o-y in May, above consensus expectations of 1.6%) and, crucially, in terms of core inflation (HICP excluding energy, food, alcohol and tobacco rose from 0.7% to 1.1%).

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Spain Snap Elections in Sight

2018-06-02

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2018-06-02

Spain Politics in General Election
Political instability in Spain has added to turmoil in other peripheral countries. The situation is not comparable with the one that Italy is experiencing at the moment, but since it comes at the same time it is increasing market volatility. Last Friday, Spain’s main oppositionparty, the Socialist party (PSOE) filed a no confidence vote against Prime Minister Mariano Rajoy. The debate will start on May 31 with a vote probably on June 1.

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Italy heads towards new elections

2018-06-01

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2018-06-01

Italian polls on voting intentions in the next general election
Fragmented politics and the risk of a financial crisis continue to hang over the country.This weekend, the Five Star Movement and the League decided to pull the plug on their attempt to form a coalition government after the President of the Republic Sergio Mattarella vetoed the appointment of anti-euro professor Paolo Savona as minister of finance. Mattarella has granted ex-International Monetary Fund official, Carlo Cottarelli, a mandate to form a...

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ECB: contingency plans

2018-05-25

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2018-05-25

ECB’s policy rates and asset purchases, including projections
A look at different scenarios for the ECB’s exit from quantitative easing and its expected rate hiking cycle.Our baseline scenario for ECB normalisation still holds. We expect QE to end in December 2018 and a first rate hike in September 2019. The ECB is likely to wait until its 26 July meeting to make its decisions on QE and forward guidance.Still, downside risks have risen to the point where another open-ended QE extension can no longer be ruled...

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PMIs point to downside risk to near term euro area growth

2018-05-24

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2018-05-24

Eurozone GDP growth
Euro area flash PMI indices failed to stabilise in May. Details were somewhat less worrying than headline numbers and overall still consistent with a broad-based economic expansion, if only at a slower pace than last year. Our forecast of 2.3% GDP growth in 2018 still holds, but the balance of risks is now clearly tilted to the downside in sharp contrast with the situation prevailing a few months ago.

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Eurosceptic Italian government faces a reality check

2018-05-22

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2018-05-22

With the putative M5S-League government publishing its final common programme, we take a look at the road ahead for the Italian economy and for Italian government debt.We expect negative noise surrounding the Italian budget to intensify initially, but believe that negotiations with Brussels will result in compromises eventually, including dilution of the incoming Italian government’s fiscal easing measures. The biggest risks lie with the proposed...

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Europe chart of the week – Italy’s fiscal buffers

2018-05-18

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2018-05-18

The incoming government’s fiscal plans could result in a sharp deterioration of Italy’s public finances. However, broader fiscal metrics are better than they were during the euro sovereign crisis.The M5S-League coalition has committed to a significant degree of fiscal easing and to the reversal of some structural reforms. Such policies will put Italy on course for confrontation with Brussels over deficit reduction targets, although at this stage we...

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Spaniards back in the mood to borrow

2018-05-11

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2018-05-11

Before the financial crisis, the real estate bubble and the parallel growth in borrowing meant that the indebtedness of Spanish households spiralled ever higher, reaching a peak of 84.7% of GDP in Q2 2010. Since then, Spanish’s households have tightened their belt, with indebtedness falling to 61.3% of GDP in Q4 2017.

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Switzerland: ‘Sovereign money’ initiative

2018-05-10

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2018-05-10

The ‘Sovereign money’ initiative, to be voted on in June, aims at a fundamental reform of the Swiss monetary system. In a nutshell, the initiative asks that the creation of money and the granting of loans be separated by barring commercial banks from creating deposits through lending. According to the initiative’s promoters the “Swiss National Bank (SNB) should be the sole organisation authorised to create money – not only cash and coins, but also...

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Gold price to remain trendless

2018-05-10

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2018-05-10

The recent strength of the US dollar coupled with the rise of the US 10-year Treasury yield has weighed on the price of gold and silver. Since 19 April, gold has lost roughly 2.3%, while silver lost almost 4.5% in USD terms.

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Europe chart of the week – Corporate Sector Soft Patch

2018-05-06

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2018-05-06

Next week’s detailed breakdown of ECB QE monthly data will reveal a marked slowdown in the pace of corporate bonds purchases in April (Corporate Sector Purchase Programme, or CSPP). Indeed, weekly holdings data have been consistent with gross purchases of around EUR3bn in April, down from EUR5.8bn on average in Q1. There are several possible explanations for the drop in gross purchases, but redemptions are not one of them, as they amounted to just...

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House View, May 2018

2018-05-06

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2018-05-06

Crude Oil Supply: Major Producers, 2010 - 2018
Pictet Wealth Management's latest positioning across asset classes and investment themes. In spite of a certain loss of momentum in positive surprises, a strong Q1 earnings season continues to justify our bullish stance on equities in most regions. We reiterate our negative view on core government bonds and remain short duration. Volatility is still higher than last year, and has increased noticeably in the bond market once again.

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Policy normalisation may be delayed in Europe

2018-05-05

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2018-05-05

Taking stock of recent dovish shifts in European central banks’ communication and reaffirming our broadly constructive macro outlook.The European Central Bank (ECB) does not seem overly concerned about the soft patch in the economy in Q1 and appears willing to collect more data before they start discussing the timing and modalities of the next policy steps. We expect the ECB to hint at an imminent end to asset purchases at its June meeting, but to...

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Euro area growth: somewhere between hard and soft data

2018-05-04

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2018-05-04

Euro Area Real GDP Growth, 2010 - 2018
According to Eurostat’s preliminary flash estimate, euro area real GDP expanded by 0.4% q-o-q in Q1 2018 (1.7% q-o-q annualised, 2.5% y-o-y), in line with consensus expectations (0.4%) and down from an upwardly revised figure of 0.7% q-o-q for Q4 2017. The implications of the growth slowdown on ECB staff projections should remain limited, in our view.

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