Author Archive

Euro area: moderate Q3 GDP growth, but more domestically driven

According to Eurostat’s preliminary estimate, euro area real GDP grew by 0.3% q-o-q (1.2% q-o-q annualised; 1.6% y-o-y) in Q3, below consensus expectations (0.4%), thus marking a gentle slowdown from the 0.4% q-o-q recorded in Q2 2015. Although detailed components are not made available with the preliminary GDP estimate, evidence from core countries suggests that […]

ECB policy meeting preview: set to ease in December despite a weaker euro

Firstly, Mario Draghi effectively made a pre-commitment to further easing at the October meeting and he is unlikely to risk disappointing the markets. Secondly, and more fundamentally, we expect the new set of staff forecasts to lead to a downward revision to the 2017 HICP inflation median projection, to 1.6% (see chart and assumptions below), clearly […]

Portugal: political uncertainty, but low systemic risk

In the general election on 4 October, the PàF coalition, led by Pedro Passos Coelho, claimed the largest share of the popular vote (38.4%), but failed to retain its parliamentary majority as it obtained just 107 seats of the 230 seats in parliament. The Socialist Party came second with 32.3% (86 seats), while the smaller […]

Equities: central banks underpinning markets

After a testing September, financial markets benefited from the boost from news of a forthcoming expansion in the ECB’s QE programme. On the US side of the Atlantic, the Fed postponed its first interest rate hike. European stock markets were also buoyed by the weak euro. The Stoxx Europe 600 rebounded by 8.1% in October, […]

Bank of England: a dovish Inflation Report points to very gradual policy normalisation

Market participants were eagerly awaiting the Bank of England’s assessment ahead of “Super Thursday”, looking for hints at the next policy move(s). Our impression is that the BoE failed to provide much clarity, postponing an actual decision to later this year or early next year. The BoE’s Monetary Policy Committee (MPC) voted by a majority […]

Hedge funds: bull or bear on China?

China has been slowing down and the outlook for emerging markets is far from positive. Summer events in China shook markets worldwide and the consensus is that the worst is yet to come. Chinese economic data has been below expectations for the past year and a half, with the industrial sector becoming increasingly weak and […]

Inflation in the euro area: the beginning of the end of negative base effects

The euro area HICP flash estimate rebounded to zero in October, or +0.04% y-o-y, after -0.08% in the previous month, as negative energy-related base effects diminished. Looking at HICP components, energy inflation continued to drag the headline rate down, rising only slightly from -8.9% to -8.7% y-o-y as Brent oil prices more or less stabilised […]

Q&A on the ECB’s negative rates – Its decision to cut rates again should be FX-dependent

The ECB is one of four major central banks to have lowered one of its policy rates into negative territory; the ECB’s rate on the deposit facility used to remunerate banks’ reserves – or the ‘depo rate’ – currently stands at ‑0.20%. The other negative experimenters, in Switzerland, Denmark and Sweden, have even lower repo and […]

Euro area: big drop in credit flows in September to be reversed

Euro area M3 and credit data surprised on the downside in September, contradicting the positive message from the ECB’s Bank Lending Survey (BLS) published last week. Overall, we believe these volatile bank credit flows are likely to rebound strongly in the months ahead, closing the gap with upbeat leading indicators like the BLS (see chart […]

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