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Change of style by the ECB

The most striking feature marking the global macroeconomic landscape last month was the package of conventional and unconventional measures announced by the ECB on 5 June. The scale and ambition of these demonstrate the ECB is aiming now at new objectives going beyond inflation targeting. It heralds no less than a crucial sea-change in its […]

Fed and ECB not in sync

Eight years after its launch, the structural abnormality captured by the “Distrusted 50″ strategy remains intact and a hedged implementation that mitigates exposure to market risk still makes much sense.

Euro area: Economic activity and asset valuations

Disappointing industrial production Euro area industrial production (excluding construction) collapsed in May (-1.1% m-o-m). The April figure was slightly revised down by 0.1pp to 0.7% m-o-m. Consequently, industrial production in April and May on average fell by 0.1% q-o-q compared with Q1. Weak performance in the four largest economies In terms of geographical developments, the largest […]

Focus on Asia

Napoleon is reported to have said that when China awoke, the world would shake. This has proved prophetic: since turning outwards 35 years ago, the Chinese economy has grown at an unprecedented rate and is expected to become the world’s largest economy within the next two decades. Other emerging markets in Asia have also grown […]

European Central Bank: Mario Draghi in synch with Janet Yellen

Thursday’s press conference focused around three main themes. First, technical information regarding the TLTROs (Targeted Longer-Term Refinancing Operations). Second, the change in the schedule for monetary policy meetings and the news that their minutes will be published. Third, reaction to the conclusions of the BIS annual report. TLTROs: not a silver bullet but potentially helpful […]

United States: sharp fall in consumption in Q1, improvement soft so far in Q2

First-quarter consumption was revised sharply down, and monthly data for May were on the soft side of expectations. However, similar to GDP data, it appears that consumer spending data suffered some distortions of late. We nevertheless remain optimistic on consumption and overall GDP growth in Q2 and H2.   Q1 growth in healthcare spending revised from […]

United States: recent pick-up in inflation is more than statistical “noise”

Inflation has picked up somewhat over the past 2-3 months. Janet Yellen described the move as “noise”. However, the uptick is widespread and with labour market slack diminishing rapidly, inflation is likely to gradually inch higher, a scenario that seems far from being completely priced in by financial markets. Core PCE inflation moved up to […]

United States: the housing market bounces back noticeably

We are optimistic that things will continue to improve progressively in the housing market. Modest rebound in existing home sales Yesterday’s data on existing home sales confirmed that following a weather-induced slump in Q1, sales rebounded in April and May. Last month, sales reached an annualised pace of 4.89 million units, 6.5% higher than in […]

Wavering optimism in the euro area

June’s PMI surveys disappointed, with the exception of German manufacturing, as sentiment deteriorated compared with May. On average, in Q2, the composite PMI is only marginally above the Q1 level. This would tend to suggest that the scenario of a rebound in Q2 GDP after disappointing Q1 GDP growth is losing steam. In terms of countries, […]

Japan: state of the economy and equity markets

Helped by frontloaded demand ahead of the consumption tax hike on 1 April, Japanese real GDP grew by a very high 6.7% q-o-q annualised in Q1. A substantial payback is happening in Q2 and GDP is likely to fall heavily q-o-q. With most economic indicators sharply up in Q1 and sharply down in April, it […]

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