Tag Archives: Uncategorized

The re-run of the Spanish general elections produced a fragmented parliament again, but a minority government could take shape. In Europe, Greece, Portugal and Italy remain political flash points. Read full report hereAfter an inconclusive vote in the December general election and the subsequent failure of Spain’s political parties to reach an agreement to form a government, Spaniards returned to the polls on 26 June. Once again, the results produced a fragmented parliament, but traditional...

Euro area real GDP grew by 0.3% q-o-q in Q4, in line with consensus expectations. Based on evidence from core countries, private consumption was once again the main driver of GDP growth. According to Eurostat’s preliminary estimate, euro area real GDP grew by 0.3% q-o-q in Q4 (1.1% q-o-q annualised; 1.5% y-o-y), in line with consensus expectations and at the same pace as in Q3. No breakdown is available at this stage, but evidence from core countries suggests that private consumption was...

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...

Given the persistent disinflationary pressures in China, monetary policy divergence lends itself to a gradual depreciation of the Chinese yuan against the greenback in 2016 towards 6.70 yuan per US dollar. On 30 November, the International Monetary Fund (IMF) officially decided to make the Chinese yuan (also called renminbi) the fifth sovereign currency in the Special Drawing Right (SDR), joining the US dollar, the euro, the British pound and the Japanese yen in this prestigious basket....

We expect Swiss real GDP growth to slightly pick up from an estimated 0.7% for 2015 to 1.1% in 2016. According to SECO’s estimate, Swiss real GDP stagnated q-o-q in Q3 (-0.1% q-o-q annualised; 0.8% y-o-y), below consensus expectations (0.2%). It came after GDP growth of 0.2% q-o-q in Q2 and a downwardly revised Q1 figure of -0.3% q-o-q. Although we cannot say that the Swiss economy is in a technical recession, it is worth highlighting that the economy is 0.1% below its level in Q4 2014...

Among its various options, we believe that the ECB would have to cut the deposit rate by at least 20bp to surprise the market. We have laid out our baseline scenario for this week’s ECB policy meeting, including a 10bp deposit rate cut, a 6-month QE extension and a possible broadening of the scope of asset purchases. Recent ECB rhetoric suggests that risks are tilted towards a more aggressive policy package. It would not be the first time that Mario Draghi over-delivers, although this time...

November’s upside surprises in surveys (PMI and IFO in particular) are unlikely to dissuade ECB policymakers that more needs to be done at their December 3 meeting. November’s euro area business surveys highlighted that the recovery continues to be largely led by domestic strength. In terms of countries, German surveys (PMI, IFO) surprised on the upside, whereas in France, surveys (PMI, INSEE) were less upbeat than in the previous month, partly reflecting the loss of confidence after the...

Macroview There is an ongoing debate about whether the world is facing secular stagnation and deflation. In the inflation/deflation debate, we are in the deflationist camp. If economic mechanisms are left unchecked, deflationary forces will rise. DM central banks will struggle to hit their 2% inflation targets. The inflation targeting monetary policy style of the 1990s and early 2000s was followed by the quantitative easing (QE) style after the 2008-11 US subprime and euro area debt...