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U.S. job creation softens, but unemployment lowest in 16 years

May was a mixed month for US employment data. Job creation was softer than expected, the figures for the previous couple of months were revised down and average hourly earnings data were somewhat disappointing. However, the unemployment rate unexpectedly fell further, reaching its lowest level since March 2001. Non-farm payroll employment rose by a soft […]

New fixing mechanism limits renminbi depreciation against the U.S. dollar

The People’s Bank of China (PBoC) recently announced the introduction of a “counter cyclical adjustment factor” (CCAF) to calculate the daily USD/CNY reference rate (the “fixing rate”). The previous formula used two factors: the USD/CNY spot close of the previous day and an adjustment factor taking into account overnight changes in demand and supply in […]

Core inflation clouds ECB’s next move

Euro area ‘flash’ HICP inflation came in at 1.4% y-o-y in May (down from 1.9% in April) while core inflation eased to 0.94% (down from 1.2%), both slightly below consensus expectations, as energy-related base effects and Easter distortions faded. We forecast euro area inflation to remain relatively stable in the next few months before core […]

Resilient earnings growth across all regions

Corporate earnings growth for Q1 2017 surprised positively across major economies. Among the key trends of this earnings season has been the synchronisation not only of the macroeconomic cycle, but also the earnings cycle. Indeed, all markets exhibited strong trends in corporate profit growth. In particular, Japan and Europe provided significant positive surprises. The strong […]

China: rising debts a long-term concern, but short-term crisis unlikely

Moody’s announced on 24 May that it had downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3, due to its concerns about the rising debt in China. According to our estimate, China’s total debt amounted to Rmb203 trillion as of the end of 2016, equivalent to 261% of its nominal […]

Looking to the politicians, ‘Perspectives’, June-July 2017

With the election of Emmanuel Macron as French president, the tide of populism may have been stemmed for the moment in western Europe. Has Europe’s political class found the formula for dealing with the phenomenon? “I wouldn’t bet my investment career on it,” answers Pictet Wealth Management’s (PWM) chief investment manager, Cesar Perez Ruiz, in […]

Trump’s proposed budget is light on details

President Trump’s budget request was issued yesterday. Higher defence and infrastructure spending are proposed, more than compensated for by drastic cuts in other spending. The consequence is that total outlays are reduced dramatically. On the revenue side, the budget plan was very short on details. It assumes that tax cuts will be neutral for the […]

Fed funds rate back to 3%?

Janet Yellen refers regularly to the concept of ‘neutral’ interest rate as a reference point for monetary policy. The neutral rate is very helpful in determining whether the Fed’s monetary stance is relaxed or restrictive and can also provide insight into the Fed’s next possible moves. The financial crisis has had a considerable impact on […]

Moderate recovery underway in Japan

Japan’s GDP grew by 1.6% year-over-year in Q1 in real terms. On a quarter-over-quarter basis, the economy expanded by 2.2% annualised, the highest growth rate since Q1 2016. In light of the stronger-than-expected Q1 figure, we have decided to revise up our 2017 GDP growth forecast for Japan to 1.3% from 0.8% previously. Exports continued […]

The populist wave may be yet to peak

Populist parties have been on the rise in Western democracies in recent years. They have already achieved two landmark successes, with Brexit and Trump, and are threatening breakthroughs elsewhere. We see six main drivers of the populist surge: rising economic insecurity, globalisation, a technological innovation shock, cultural backlash, broader socio-economic change, and fragmentation of information […]

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