Macroview

Euro bank credit still strong in spite of February weakness

The euro area M3 and credit report for February was slightly disappointing overall. Broad money growth (M3) eased from 4.8% to 4.7% y-o-y.  Bank loans to non-financial corporations fell back to 2.0% y-o-y in February, from 2.3% in January, as a result of weaker lending flows across the region. Notwithstanding this modest setback, the euro […]

Profit dynamics support further upside for equity markets

Our 2017 scenario, drawn up last December, called for a total annual return of 10% for global equities this year. We attributed the bulk of this performance to a double-digit rise in estimated corporate profits. As the Q4 2016 reporting season draws to a close, 2017 earnings expectations are proving resilient or are being revised […]

Another spectacular rise in euro area PMIs

The average composite PMI is now consistent with a GDP growth rate of about 0.6% q-o-q in Q1, above our forecast. At the same time, hard data came in slightly weaker than expected, suggesting that business surveys might be overstating the pace of growth to some extent. As a result, we are keeping our growth […]

Take-up of TLTRO loans is good news for euro bank credit

The fourth and final of the ECB’s Targeted Long-Term Refinancing Operations (TLTRO) today attracted EUR233bn in demand from 474 euro area banks, well above consensus (EUR110bn). Expectations of an ECB deposit rate hike may have boosted demand for this operation, as it provided a last opportunity for banks to secure four-year funding at a rate […]

Escaping from planet NIRP

The debate over the ECB’s exit strategy from its negative interest rate policy (NIRP) has started in earnest. Recent comments point to a possible reversal in the exit sequencing, with a deposit rate hike preceding the end of net asset purchases. A one-off adjustment in negative rates would have some merits, including for banks’ interest […]

A more neutral tactical stance on the EUR/USD rate

The monetary policy meetings of the European Central Bank (ECB) on 9 March and of the Federal Reserve on 15 March have put upward pressure on the euro versus the US dollar. Euro area real rates have risen on prospects for an early rate hike whereas US real rates have declined on the perceived dovishness […]

No hint of Swiss rate rise

At its latest policy meeting on 16 March, the Swiss National Bank (SNB) left the interest rate on sight deposits at a record low of -0.75% and the central bank reiterated its willingness to intervene in the foreign exchange market if needed, “taking the overall currency situation into consideration”, as it had mentioned in its […]

Markets react well to Fed hike

In line with what almost every forecaster was expecting, the Federal Open Market Committee (FOMC) decided at its latest policy meeting to raise the Fed funds rate target range by 25bp to 0.75%-1.0%. Fed Chair Janet Yellen explained that the decision to raise rates was appropriate “in light of the economy’s solid progress toward our […]

China: growth looking good for first half before possible deceleration in second

The first batch of hard data on domestic activity for 2017 points to strong momentum in fixed-asset investment (FAI) and industrial production, while consumption has been on the weak side. In the first two months of 2017, FAI grew by 8.9% y-o-y, compared with 6.5% for December 2016 and 8.1% for 2016 as a whole. As […]

Monthly Investment Strategy Highlights, March 2017

Asset allocation We remain comfortable with our overweight position in developed-market (DM) equities and believe there are good reasons to be positive on Japanese equities. With volatility low and risks looming in the short term, this is a good time to add protection to portfolios. We have bought derivative protection on EUR high-yield bonds and […]

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