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China: PMIs suggest moderation in momentum in Q1

China’s official manufacturing purchasing manager index (PMI) came in at 51.3 in January, down slightly from December (51.6). The Markit PMI (also known as the Caixin PMI) stayed at 51.5, the same as in the previous month. Meanwhile, the official non-manufacturing PMI rose slightly in January. The official composite index, which is a weighted average […]

US dollar: down but not out

Given the boost to US growth from the tax cuts, one might ask why, between the ratification by the US Congress of the Trump tax cuts on 19 December and 26 January, the US dollar index lost roughly 4.6%. We see two key drivers behind recent dollar weakness: the growth differential between the US and […]

US chart of the week – Alter egos

US growth has been solid lately. However, drilling down into state-level data, we can see wide discrepancies in growth from one US state to the next. Indeed, a lot of the growth ‘heavy lifting’ in recent years has been done by Texas, propelled by oil production, and by California, propelled by the tech boom. More […]

When will the SNB start the process of policy normalisation?

There are several reasons to believe that the SNB may soon start to normalise its monetary policy. First, the Swiss macroeconomic outlook has improved: Swiss growth is picking up and becoming broader-based across a range of sectors, while inflation is also gradually rising. Second, the Swiss franc has weakened and the pressure on the currency […]

Core inflation still “some distance” from ECB’s criteria

Euro area core inflation rebounded to 1.0% in January, from 0.9% in the previous month, in line with expectations. There is no escaping the fact that the ECB remains “some distance” from meeting its inflation criteria, as Peter Praet said this week. Our inflation forecasts are consistent with a delayed normalisation in the ECB’s stance […]

Euro area Q4 GDP growth: Strong, but not stronger

According to Eurostat’s preliminary estimate, euro area real GDP rose by 0.6% q-o-q in Q4 (2.3% q-o-q annualised; 2.7% y-o-y), in line with consensus expectations but slightly less than its upwardly-revised 0.7% q-o-q increase in Q3. The euro area economy expanded by 2.5% in 2017 overall, its fastest annual growth since 2007. The flash Q4 […]

Ten-year Treasury yield has further to rise

Given our expectations of a rebound in core inflation, accelerating growth and a faster rise in the Fed funds rate this year, we now expect the 10-year US Treasury yield to rise from 2.7% as of 29 January to 3.0% by the end of 2018 (our previous forecast for end-2018 was 2.6%). This rise is […]

Strong growth and Abenomics mean Japanese equities continue to provide opportunities

Japanese growth momentum is at its strongest in over a decade, with the quarterly Tankan survey of business conditions and sentiment strengthening to an 11-year high in Q4 2017. The Japanese economy may have expanded by 1.8% in 2017, up from 0.9% in 2016. In 2018, the growth rate may moderate slightly to 1.3%, but […]

Fed to drop hints about its increased optimism

The Fed meets on 30-31 January, a ‘tier 2’ meeting as there will be no press conference nor new economic projections. Rates should remain on hold. Still, the Fed could drop some hints that its optimism about the US and global economy is on the rise. We think this increased optimism will pave the way […]

Tax cuts and ‘animal spirits’ mean higher US growth in 2018

December’s US tax cuts – which saw corporate taxation sharply reduced – are being echoed in signs that ‘animal spirits’ are finally kicking in. Both set the stage, in our view, for higher US growth, in large part driven by greater investment. We have raised our 2018 US growth forecast to 3.0% (from a previous […]

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