In an environment of zero risk-free rate of return and intense exploitation of anomalies to produce independent market returns, alternative strategies must more than ever be nested within the asset allocation as a whole, rather than considered separately as satellite around a conventional core of portfolio assets.
All in all, the ECB’s announcements on Thursday were below expectations. The 25bp rate cut had been widely expected. Despite Mario Draghi’s assertions, it is unlikely that this cut will have a decisive impact on economic recovery and on banks’ financing costs.
For investors, in a context of deflation, caution calls to focus on good balance sheets (sovereign as well as private) and to concentrate in companies able to grasp growth where it is, such as companies exporting in fast growing markets.
Monthly data published at the end of last week confirmed that the federal budget deficit has fallen very rapidly. Over the first seven months of fiscal year (FY) 2013, i.e. from October 2012 to April 2013, the deficit reached $487.6bn, 32.3% less than over the same period a year before. This sharp improvement was mainly linked to a surge [...]
Eurostat’s preliminary estimate showed that real GDP dropped by 0.2% q-o-q in Q1 (-0.9 % q-o-q annualised), worse than consensus expectations (-0.1% q-o-q) and after a contraction of 0.6% q-o-q in Q4. With this sixth consecutive quarter of decline, the euro area is experiencing its longest-lasting recession since the post-war period. Heterogeneous figures in core [...]
Total industrial production fell by 0.5% m-o-m in April, further than the consensus estimate (-0.2%). Moreover, the rise recorded in March was revised down from +0.4% to +0.3%. Part of this weakness was explained by a widely expected contraction in the production of utilities (-3.7% m-o-m), following a surge in March (+6.4%), amid exceptionally cold [...]
Yesterday’s retail sales numbers were surprisingly positive. Nominal retail sales inched up by 0.1% m-o-m in April, well above consensus expectations (-0.3%). The figure for March was revised down from -0.4% to -0.5%, but the one for February was also revised up by 0.1% (from +1.0% to +1.1%). As expected following the sharp m-o-m decline [...]
Against the fall expected by consensus (-0.1% m-o-m and weak industrial surveys1), German industrial production increased by 1.2% m-o-m in March. The rise was the second consecutive monthly gain. The February figure was revised up marginally from 0.5% m-o-m to 0.6% m-o-m. As a result, over Q1 as a whole, production increased by 0.2% q-o-q, better than Q4’s 2.6% [...]
Although today’s set of data will lessen market fears of a marked economic slowdown, we continue to expect growth to slow substantially in Q2 before regaining momentum in H2. Non-farm payroll employment rose by 165,000 m-o-m in April 2013, slightly above consensus expectations (+140,000). Moreover, March’s figure was revised up (from +88,000 to +138,000), as [...]
Thursday’s European monetary announcement only true surprise in terms of monetary policy was that the Governing Council appears to be seriously considering a negative deposit rate. However, as it is a two-edged tool, its impact on bank loans would be uncertain. No clear guidance to unlock the credit crunch A decision to buy asset-backed securities [...]
According to Eurostat’s flash estimate, euro area annual inflation is expected to be 1.2% in April, down from 1.7% in March and well below consensus expectations of 1.6% y-o-y. It is the largest monthly fall since May 2009 and also the lowest level since February 2010. Moreover, the euro area’s core annual inflation (inflation excluding [...]
US real GDP grew by 2.5% q-o-q annualised in Q1 2013, below the consensus estimate of +3.0%. This healthy reading must be put into perspective as it represents to a large extent a catch-up following a very low growth rate in Q4 2012, which was negatively impacted by hurricane Sandy. On a year-on-year basis GDP [...]