Macroview

Search for policy flexibility poses dilemma for ECB

The European Central Bank (ECB) faces a communication dilemma ahead of its 8 December meeting. Amid growing evidence of a more robust recovery and improved policy transmission, there is a case for a reduction in the pace of asset purchases at some point in 2017. However, signalling an eventual tapering of asset purchases now would […]

Arbitraging between equity investment strategies

The US Value equity strategy’s outperformance has accelerated since the US elections on November 8. Over the 15 trading days following the elections, our Value index returned 9.8% (in US dollars), compared with 8.2% during the preceding six months. Current economic and equity market dynamics reveal an opportunity to arbitrage between two distinct equity investment strategies: […]

U.S. growth to slow in H1 2017 before rising again in H2

US GDP growth was revised up from 2.9% to 3.2% for the third quarter. The main reason was a higher estimate of growth in consumer spending. Turning to Q4, economic data published so far have been mixed. Data on consumption in October were a bit disappointing. And advance estimates for the trade deficit and inventories […]

Long-term dollar appreciation reaching maturity

Our core scenario foresees risk appetite remaining robust as President Trump adopts a more moderate stance on protectionism than his past rhetoric would suggest. The USD should appreciate most against low-yielding currencies. But while we acknowledge that fundamental drivers also justify further USD strength, we believe that the long-term trend of USD appreciation is reaching […]

Credit impulse remains weak in euro area

Euro area bank credit flows to non-financial corporations rebounded strongly in October, by EUR11 bn in adjusted terms. Bank loans to households continued to expand at a healthy pace (+EUR10 bn). The slowdown in annual growth of the broad monetary aggregate M3, from 5.1% to 4.4% year on year in October, was largely due to […]

Signs of higher growth and inflation in the euro area

Flash purchasing managers’ indices (PMI) for November, compiled by Markit, delivered upside surprises across most countries and sectors in the euro area. Business confidence remained very strong in Germany, and improved markedly in France and peripheral countries. The euro area composite PMI rose to 54.1, pointing to real quarter-over-quarter (q-o-q) GDP growth of at least 0.4% […]

European populists unlikely to replicate Trump win

While the Italian referendum is the most obvious near-term risk, we see extremely low chances of a nationalist, anti-European party winning a major election next year or holding a legally-binding referendum on EU/EMU membership. Apart from any other consideration, electoral processes are too different from the US to allow for lazy extrapolations. Taking a closer […]

2017 growth forecast for U.S. remains unchanged for now

Figures released on November 15 show that core retail sales in the US rose by a strong 0.8% month over month in October, well above consensus expectations. Moreover, figures for the previous months were revised up. We believe consumer spending will grow by around 2.5% q-o-q annualised in Q4 (2.1% in Q3) and that it […]

Referendum at heart of Italian uncertainties

The 4 December referendum on senate reform is the next big event on the European political calendar, coming just ahead of the next ECB and Fed policy meetings on 8 December and 14 December, respectively. We believe a ‘Yes’ vote would boost government confidence and marginally help Italian securities, but is unlikely to represent a […]

Implications of Trump’s election win

A Trump presidency could see major changes in policy on many themes such as fiscal policy, trade policy, immigration, the environment, financial regulation, healthcare, social security, and supervision of the Fed. However, it remains highly uncertain whether Trump will in fact pursue the policies he aired during the campaign. On fiscal policy, Trump has made […]

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