Tag Archives: Macroview

As we had expected, the Fed raised short-term interest rates yesterday for the first time in almost a decade, increasing the target range for the federal funds rate by 25 basis points to 0.25-0.50%. The Fed has finally moved interest rates up from their historic lows. Market reaction has been muted, since the much-trailed hike was fully priced in across asset classes. But, as we have long stressed, attention will now shift to the pace and timing of further tightening, which will create...

The ECB will likely remain under pressure to act (again) in 2016. We see the risks tilted towards additional monetary stimulus by Q2 2016. Euro area HICP inflation was revised slightly higher in today’s Eurostat report, to +0.20% y-o-y in November (from 0.14% in the flash estimate to 0.15% in the final figure on the back of marginally stronger food and energy prices). Base effects are expected to push inflation higher in the next few months, although the renewed decline in oil prices...

Employment growth in the euro area has been broadly spread and includes many countries that were hard hit by the crisis. Almost one third of the recovery in euro area employment has come from Spain. Today’s Eurostat data showed that euro area employment increased by 0.3% q-o-q (1.1% q-o-q annualised; 1.1% y-o-y) in Q3, thus posting its ninth quarter-on-quarter consecutive expansion. The Q2 figure was slightly revised up by 0.1pp to 0.4% q-o-q, the highest growth rate in more than seven...

Today, the Riksbank left both the repo rate (-0.35%) and its QE programme unchanged (for a total of SEK200bn in bond purchases by June 2016), as expected. The Swedish central bank's forward guidance was strengthened somewhat as its Executive Board said that “policy rates will not be raised until CPIF inflation has stabilised around 2% during the first half of 2017”. Meanwhile, the Board stated that is was “highly prepared” to ease policy, “even between the ordinary policy meetings”,...

China is actively trying to loosen the link between the Chinese yuan and the US dollar. In 2016 the divergence in monetary policies should prompt a gradual move towards CNY6.70 per USD. Since the beginning of November, the Chinese yuan (also known as the renminbi) has moved from roughly CNY6.32 per USD to CNY6.46 per USD, with an acceleration over the past few days. This depreciation means that the Chinese yuan has lost more than 2% against the US dollar, rekindling fears of a broad CNY...

Core retail sales rose by a strong 0.6% m-o-m in November, above consensus expectations (+0.4%). Today’s retail sales report was rather upbeat. Although consumption growth can be expected to slow somewhat in Q4, we remain sanguine on overall consumption growth in 2016. Nominal total retail sales increased by 0.2% m-o-m in November, slightly below consensus expectations (+0.3%). Total sales were dented by a 0.8% m-o-m fall in nominal sales at gasoline stations (on the back of lower...

As deleveraging pressures ease and credit conditions improve, conditions should be finally in place for business investment to accelerate in 2016. Today’s GDP release by Eurostat showed euro area investment stagnating in Q3 (0.0% q-o-q), below consensus expectations (+0.2%), following an upwardly revised albeit still modest 0.1% q-o-q increase in Q2. Private investment has failed to boost activity in any meaningful way since the latest leg of the recovery started two years ago. Subdued...

Macroview Expected returns of traditional asset classes are reaching historical lows: equity valuations are stretched and negative bond yields are not unusual. Should investors be looking at hedge funds to enhance returns and diversify their portfolios? This has been one of the most disappointing years for hedge funds since 2008. A series of macro and idiosyncratic events – ranging from the ECB’s QE, to the Greek and Chinese crises, to the healthcare meltdown – created an unfavourable...

Today’s employment report coupled with yesterday’s downward move in the trade-weighted USD following ECB decisions has probably settled the case for a December hike. November’s employment report was healthy. Job creation came in above expectations, with upward revisions for the previous two months. The unemployment rate (stable at 5.0%) and wages (+0.2% m-o-m) were in line with consensus expectations. The Fed will most probably hike rates in December. Non-farm payroll employment rose by...

ISM surveys are not very reliable at forecasting GDP growth in the short run. Nevertheless, the figures look reasonably good, at least compared to what the hard falling headline numbers for November might suggest. Both ISM indices dropped markedly m-o-m in November. However, while the Manufacturing index fell to a new cycle-low, its Non-Manufacturing counterpart remained pitched at a still relatively robust level by past standards. Taken together, they point towards economic growth...