Tag Archives: Macroview

After a jobs report seriously distorted by extreme weather, the Fed remains on track to raise rates again in December.Nonfarm payrolls fell 33,000 in September, with data affected by hurricanes in the southern US. These aside, labour market signals – especially when looking at the household survey – remain solid. After a drop of 74,000 in August, employment rose 906,000 in the household survey, leading to a sharp fall in unemployment to 4.2%, the lowest rate since February 2001.The bottom...

Switzerland fulfils two of the three criteria required to be considered a currency manipulator by the US, but it is unlikely to affect the SNB’s monetary policy stance.In the next few days, the U.S Department of Treasury will publish its semi-annual report on International Economic and Exchange Rate Policies. Switzerland is one of six countries on the department’s monitoring list, as it meets two of the three conditions established by the US Treasury to be deemed a ‘currency manipulator’....

Our baseline scenario for 2018 sees a moderate rise in benchmark bond yields. But US Treasury yields could be stuck at 2.5% as growth moderates and inflation remains stubbornly low.In our start-of-the-year scenario for 2017, we thought that inflation, monetary and fiscal policy would push yields on core sovereign bonds higher, except on Japanese ones. In the event, political gridlock in Washington forced us to abandon our expectations for a significant fiscal stimulus in the US that would...

A sharp rise in boat buying suggests that US economic expansion has matured.A key question for investors is how to gauge the point we are at in the US business cycle. Some are worried that we have already surpassed the length of the previous expansion. According to data from the National Bureau of Economic Research, we are 99 months into an upward cycle that started in July 2009, while the 2002-07 expansion lasted for 72 months. That said, we are still below the lengthy expansion of the...

The decision to lower reserve requirements for some lending does not represent a policy shift by the PBoC, still intent on reining in excessive financial leverage.The People’s Bank of China (PBoC) announced on 30 September that it would lower the required reserve ratio (RRR) for selected banks by 50-150 basis points (bps) from the beginning of next January.Specifically, banks eligible for a 50 bps cut to their RRR will include those that have at least 1.5% of their existing loans or of their...

The latest ECB credit report confirmed that credit flows in the euro area remains strong. But reliance on bank credit is falling in Europe.The ECB’s M3 and credit report for August published this week was pretty strong overall and confirmed the ongoing improvement in lending dynamics in the euro area. Bank credit flows to the private sector (adjusted for seasonal effects and sales and securitisations) amounted to €17bn in August, lower than the July figure of €39bn. In y-o-y terms,...

We are sceptical that Trump’s tax proposals will make much headway and that what tax cuts are enacted will add much to US growth.President Trump’s ambitious tax plan, just unveiled, aims to simplify and lower tax rates for households and corporates, with the statutory tax rate for the latter to be reduced to 20% from 35%.We remain sceptical that this plan will see its way through Congress given opposition from Democrats and even some Republicans wary about sharp increases in the deficit. The...

Developments in Brexit negotiations, a hawkish Bank of England, and the strong performance of blue chip stocks mean that we have been updating our forecasts for the UK.Although the UK macro outlook has not changed much in recent weeks and considerable uncertainty remains in terms of the Brexit negotiations, the BoE’s hawkish shift has led to a material repricing of UK assets, including the currency and rates. In addition to monetary policy considerations, another driver of improved market...

US corporations’ cash accumulation continues unabated, leading to the rise of ‘superstar’ firms that are crushing market competition.We think many keys for understanding the US economy right now – and why it may not be behaving the way textbook economics say it should – are to be found at the microeconomic rather than macroeconomic level. What the microeconomic picture shows is a sharp reduction in the level of market competition due to the rise of a small number of ‘superstar’ firms with...

The German election proved less predictable than some thought. Coalition talks are likely to be long and difficult, complicating moves to deepen European integration.Angela Merkel looks set to secure a fourth term as Chancellor amid growing fragmentation and a surge in far-right support. The only arithmetically possible options are another Grand Coalition (ruled out by the SPD) and a Jamaica coalition between the CDU-CSU, FDP and the Greens (very difficult due to diverging positions on a...