Tag Archives: Macroview

The latest economic data indicate a steady pace in the Chinese economy as 2016 draws to a close. But while we don’t expect a hard landing, 2017 will bring challenges for China on many fronts.The latest data releases out of Beijing indicate steady momentum in the Chinese economy. Exports are showing signs of recovery and investment in manufacturing is helping to offset a recent drop in property investment. All in all, the latest data releases are consistent with our full-year GDP forecast of...

The ECB decided to extend its QE programme beyond March 2017 at a slower pace of EUR60 bn, until December 2017, or beyondThe ECB made the following announcements at its 8 December meeting:• QE extension: asset purchases will be continued for an extra nine months, at a pace of EUR60 bn month from April to December 2017 (or beyond, if necessary), with an option to increase the size and/or duration of purchases if “the outlook becomes less favourable or if financial conditions become...

Despite the lack of wage growth, yen weakening and higher commodity prices mean inflation in Japan may start to move higher.The labour survey for October shows that wage growth remains sluggish in Japan, despite increasing signs of tightness in the labour market. Nonetheless, inflation in Japan may start to move higher on account of external factors such as the exchange rate and commodity prices.Japanese workers’ cash earnings rose by just 0.1% year-over-year in October. Earnings have been...

Aggregate purchasing manager indices are pointing to upticks in growth and inflation in developed markets in line with our central scenario, but emerging markets are lagging.Global sentiment improved slightly in November, to 52.1 from 52.0 in October, according to Markit’s global Purchasing Manager Index (PMI). This is the third monthly improvement in a row. One has to look back to August 2014 to find a higher level.Advanced economies are among the more upbeat. Business sentiment in November...

Rejection of the government-backed constitutional referendum opens up a period of uncertainty for the Italian economy and financial system, but ECB’s continued dovishness will provide support.The Italian referendum on Senate reform was rejected on 4 December by a surprisingly wide margin (59% versus 41%) on high voter turnout. In the short run, the main risk is that rejection of the government-backed referendum will render a market-based recapitalisation of the Italian banking sector more...

The unemployment rate fell to a fresh cyclical low in November, and while wage growth disappointed, we expect it to pick up progressively next year.US non-farm payroll employment rose by a healthy 178,000 month-on-month (m-o-m) in November, in line with consensus expectations. Unexpectedly, the US unemployment rate fell further in November, to 4.6% from 4.9% in October, reaching its lowest level in more than nine years. At 4.6%, the US unemployment rate is now below the median rate of 4.8%...

Our base forecast is that the ECB will extend QE by six months, but will modify forward guidance.The European Central Bank (ECB) faces a communication dilemma ahead of its 8 December meeting. Amid growing evidence of a more robust recovery and improved policy transmission, there is a case for a reduction in the pace of asset purchases at some point in 2017. However, signalling an eventual tapering of asset purchases now would almost certainly trigger an unwarranted tightening of monetary...

The market leadership of US ’Value' has strengthened considerably in the aftermath of the US elections.The US Value equity strategy’s outperformance has accelerated since the US elections on November 8. Over the 15 trading days following the elections, our Value index returned 9.8% (in US dollars), compared with 8.2% during the preceding six months.Current economic and equity market dynamics reveal an opportunity to arbitrage between two distinct equity investment strategies: US ‘Low Vol’...

The tightening of monetary conditions is impeding near-term prospects for the US. But a probable fiscal stimulus will help revive growth again in the latter part of 2017.US GDP growth was revised up from 2.9% to 3.2% for the third quarter. The main reason was a higher estimate of growth in consumer spending. Turning to Q4, economic data published so far have been mixed. Data on consumption in October were a bit disappointing. And advance estimates for the trade deficit and inventories showed...

But the potential for fiscal stimulus and ongoing Fed tightening are factors that support USD appreciation in 2017 at least.Our core scenario foresees risk appetite remaining robust as President Trump adopts a more moderate stance on protectionism than his past rhetoric would suggest. The USD should appreciate most against low-yielding currencies. But while we acknowledge that fundamental drivers also justify further USD strength, we believe that the long-term trend of USD appreciation is...