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US economy: Too-loose financial conditions versus too-low inflation

Several Federal Reserve (Fed) officials, and a few foreign central bankers, will meet for their traditional August gathering in Jackson Hole, Wyoming, on 24–26 August. Fed Chair Janet Yellen will give the opening speech on Friday (08:00 local time, 16:00 Geneva), but with neither a Q&A session, nor a scheduled media briefing. Unlike her predecessor, […]

North Korea: Spikes in tensions look set to continue

The tensions between North Korea and the US that rose a notch in early August are rooted in the deep sense of insecurity of the regime of Kim Jong Un. A significant new stage in North Korea’s nuclear programme has now been reached, and the regime appears to believe that developing a credible nuclear deterrent […]

The fourth industrial revolution is transforming corporates’ prospects

Amid a growing challenge from the emerging world, US and European industrial companies must be at the forefront of technological innovation to stay competitive. With the fourth industrial revolution, a new industrial era is opening up: digitisation. The fields of application of digitisation are vast, covering all aspects of industrial production, from the conception of […]

The ECB and the euro, from Amsterdam to Sintra

The trade-weighted EUR has appreciated by 4.8% since the ECB’s June meeting. ECB models and Mario Draghi’s rule of thumb suggest that a stronger currency could lower euro area inflation by about 30-40bp in 2018-2019, all else being equal. But all else is not equal, and the euro area economy is in a very different […]

Monthly Investment Strategy Highlights, August 2017

Asset allocation We retain a slight overweight in DM equities owing to good fundamentals, but it is especially important at present to be well protected against downside risk. Markets appear unduly complacent, and volatility could rise in the coming months. This will create opportunities for tactical trading and especially hedge funds. Low correlations and a […]

In spite of broadening growth, ECB will remain prudent

While the latest euro area GDP numbers were broadly in line with expectations, at 0.6% quarter-on-quarter in Q2, net revisions to past data pushed the GDP profile higher again. Once detailed estimates are published by Eurostat—and assuming there are no significant revisions to past data—we might revise our 2017 annual growth forecast for the euro […]

France & Spain : Strong Q2 GDP growth performance

France and Spain today were the first big countries in the euro area to publish GDP growth figures for Q2 2017. French real GDP rose by 0.5% q-o-q in Q2 2017, the same pace as the two previous quarters. The details showed that domestic demand remained solid, while the sharp improvement in net exports offset […]

Euro area : Momentum slows at the start of Q3

The composite flash PMI fell to 55.8 in July from 56.4 in May, below consensus expectations (56.2). The headline dip was entirely driven by the manufacturing index, which fell to 56.8 in July from 57.4 in June. By contrast, the services index remained stable at 55.4. The PMI’s forward-looking components remained pretty strong, despite edging […]

Sluggish inflation will keep BoJ on easing for a long time

In July’s monetary policy meeting, the Bank of Japan (BoJ) decided to keep its monetary easing programme unchanged, maintaining its qualitative and quantitative easing (QQE) with yield-curve control (YCC). In addition, the BoJ cut its inflation estimates for the current and next fiscal years, and revised its expectation for hitting its 2% target to one […]

ECB: see you in autumn

At its July meeting, the ECB made no change in its monetary policy statement, as we expected. Importantly, the bias for QE extension “in terms of size and/or duration” was kept in the statement. ECB president Mario Draghi mentioned that the Governing Council (GC) was unanimous in communicating no change to forward guidance. Draghi reiterated […]

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