Tag Archive: Macroview

Europe chart of the week – public debt

2018-05-03

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2018-05-03

This week’s Eurostat releases revealed that public finances continue to improve in most euro area member states. As a result of falling deficits, low interest rates and stronger nominal growth, the ratio of euro area government debt to GDP fell to a six-year low of 86.7% in Q4 2017.

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Where next for oil prices?

2018-05-03

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2018-05-03

On 19 April, the price of a barrel of oil reached USD69.56 for West Texas Intermediate (WTI) and reached USD75.27 for Brent, today, the highest price since 2014. Since 9 April, oil prices have been significantly above their longterm fundamental equilibrium value. Three factors explain what has happened.

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House View, April 2018

2018-05-02

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2018-05-02

House View Equities, April 2018
Pictet Wealth Management's latest positioning across asset classes and investment themes. While macroeconomic and corporate fundamentals still favour risk assets, challenges have been steadily increasing and a lot of good news is already priced into valuations. We sold part of our equity overweight during the early March rally.

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Euro weakness should prove temporary

2018-05-01

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2018-05-01

Over the past 10 days, the euro has declined significantly against the US dollar. On 26 April, the EUR/USD rate moved below the low of its 1.21501.2550 trading range, which had been in place since 18 January. Reasons for this decline can be found in the growth differential and monetary policy divergence.

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The ECB’s steady hand

2018-04-28

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2018-04-28

Another ECB meeting, another balanced message of confidence and prudence. Unsurprisingly, the statement mentioned the deterioration in the data flow since March, but our impression is that the ECB is largely brushing off concerns about a soft patch in the economy for the moment.

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Russian rouble: significantly undervalued but quite risky

2018-04-23

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2018-04-23

On 6 April, the Trump Administration announced additional and more severe sanctions against Russia “in response to the totality of the Russian government's ongoing and increasingly brazen pattern of malign activity around the world”. US sanctions target seven Russian oligarchs, 12 companies controlled by them, and 17 high-ranking government officials. The measures freeze any US assets held by those targeted and cut them off from US finance, trade...

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Euro area core inflation to rise again after Easter

2018-04-22

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2018-04-22

The ECB’s Governing Council may have to wait a little longer to get a clearer view of where euro area core inflation is heading in the near term. The early timing of Easter this year has made travel-related services prices more volatile. Another reason is that an unexpected drop in core goods inflation has fuelled concerns over a potentially larger FX pass-through.

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ECB policy: Stop Worrying and Love the Soft Patch

2018-04-21

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2018-04-21

For all the talk about weaker economic momentum and low inflation in the euro area, we would not jump to conclusions in terms of ECB policy. True, downside risks have re-emerged over the past couple of months, generating understandable concerns and frustration in Frankfurt. However, the ECB is unlikely to respond unless those risks materialise, which is not our central case.

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Switzerland, still on the monitoring list

2018-04-18

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2018-04-18

The U.S. Department of Treasury has just published its semi-annual report on International Economic and Exchange Rate Policies. It comes at a time when the US Administration remains deeply concerned by the significant trade imbalances in the global economy. The report only focuses on the US’s 12 largest trading partners, which collectively account for more than 70% of the US’s trade in goods.

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Hard data proves soft in the euro area

2018-04-14

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2018-04-14

Signs of a certain loss of momentum may well fuel additional ECB dovishness in the near term, but is unlikely to compromise upcoming policy normalisation.Euro area industrial production (excluding construction) was weak in February (-0.8% m-o-m) and follows the recent release of other disappointing pieces of hard data such as retail sales, German factory orders and trade. Based on available ‘hard’ data, real GDP growth rate in the euro area is...

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Europe has a lot to lose from trade wars

2018-04-08

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2018-04-08

Any estimate of the economic costs of protectionist measures, let alone trade wars, is subject to uncertainty given the complexity of global supply chains. A common assumption is that new tariffs on exports will produce small direct effects on GDP growth but more significant indirect effects in the event of escalating trade conflicts, including on domestic investment.

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Larger-than-expected reduction in French public deficit

2018-03-30

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2018-03-30

France’s public deficit fell to 2.6% of GDP in 2017 according to INSEE’s preliminary assessment, down from 3.4% in 2016 and below the 3% threshold for the first time since 2007. The outcome was better than the government’s estimate of a 2.9% deficit. If confirmed, France will exit the Excessive Deficit Procedure that the European Commission opened in 2009.

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Impact of recent tariffs on US and China’s GDP should be limited for now

2018-03-29

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2018-03-29

The Trump Administration last week announced tariffs of 25% on USD 60bn worth of imports from China (out of USD506bn of total Chinese merchandise imports). The list of products targeted, still has to be thrashed out. The official aim is to sanction China for alleged theft of US firms’ intellectual property; the US Trade Representative (USTR) estimates the damage amounts to USD 50bn.

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British pound – Smoother transition, stronger sterling

2018-03-28

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2018-03-28

Recent positive developments in the United Kingdom (UK), namely the transitional deal reached between the UK and the European Union (EU) on 20 March and the strong job market report on 21 March, call for a more positive short-term outlook for the sterling than previously thought. We therefore revise our projections upward for the sterling on the entire time horizon.

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Disentangling the Swiss current account

2018-03-27

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2018-03-27

Following the Swiss National Bank’s (SNB) publication of Switzerland’s balance of payments data for Q4 2017, in this note we look deeper into the Swiss current account to try to find out why Switzerland persistently runs a surplus and whether or not the current account balance can be used to assess the fair value of the Swiss franc.

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Euro area Flash PMIs: “Growing pains” but no reason to panic

2018-03-24

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2018-03-24

Today’s first batch of euro area March business surveys looks worrying at first sight. The drop in the euro area composite PMI index, from 57.1 to 55.3 in March (consensus: 56.8), was the second one in a row and the largest monthly decline in six years. New orders fell to a 14-month low. The correction in business sentiment was predominantly driven by the manufacturing sector, which could reflect broader concerns of a trade war.

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Europe chart of the week – monetary policy

2018-03-23

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2018-03-23

Much of recent ECB dovish rhetoric has been building around the (not-sonew) idea that potential growth might be higher than previously thought, implying a larger output gap and lower inflationary pressure, all else equal. The argument is both market-friendly and politically welcome – what we are seeing is the early effects of those painful structural reforms implemented during the crisis. Inflation would be low for good reasons.

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Europe chart of the week – Employment

2018-03-17

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2018-03-17

Euro area employment grew for the 18th consecutive quarter in Q4 2017 (+0.3% q-o-q), and is now 1.5% above its pre-crisis (2008) level. By contrast, hours worked per person employed decreased during the same period, remaining 4% below their pre-crisis level. The two data series have followed divergent trends since the start of the economic recovery. Between Q1 2008 and Q2 2013, the total amount of labour input used by firms decreased massively.

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Too early for Switzerland’s central bank to change policy…

2018-03-15

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2018-03-15

Switzerland: headline inflation and SNB inflation forecasts
At its latest quarterly monetary policy assessment unveiled today, the Swiss National Bank (SNB) maintained its accommodative monetary policy. The target range for the 3-month Libor was kept between -1.25% and -0.25%, the interest rate on sight deposits with the SNB was maintained at a record low of -0.75%, and the central bank reiterated its willingness to intervene in the foreign exchange market if needed.

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ECB begins to rotate forward guidance

2018-03-12

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2018-03-12

The ECB made one small change to its communication in March consistent with a normalisation process that is likely to remain very gradual. In line with our expectations, today the Governing Council (unanimously) decided to drop its commitment to increase asset purchases “in terms of size and/or duration” if needed, which had steadily become more difficult to justify and less credible anyway.

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