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Risks for high-yield bonds are rising

US and euro high yield have performed strongly between Donald Trump’s election as US president and the end of June. However, our analysis of fair value suggests there is potential for a widening of spreads and a rise in default rates ahead. Our multi-factor model of high-yield corporate spreads enables us to forecast US and euro […]

The dollar should rebound in the coming months

The euro appreciated significantly against the US dollar (by as much as 1.4% at one stage) on 27 June, reaching a 10-month high. The main reaon was a speech by ECB President Mario Draghi at the ECB forum on central banking at Sintra. To a lesser extent, the ongoing struggle to find legislative consensus among […]

EA: Bank credit flows rose again in May

Euro area credit flows to non-financial corporations increased again in May, by EUR10 bn in adjusted terms, following a gain of EUR11 bn in April. Broad money growth (M3) rose marginally from 4.9% to 5.0% y-o-y. Bank lending growth to the private sector was broadly unchanged at 2.6% y-o-y, in line with leading indicators. Overall, […]

Chinese infrastructure companies will benefit from sustained high investment

A high level of investment in infrastructure in China is set to continue into the medium term. Under the latest Five Year Plan (FYP), for 2016-20, the transportation sector is to see CNY15 trillion (USD2.2trn) of capital expenditure, much of which will go into roads and railways. Another major domestic project, the Xiongan New Area, […]

Euro PMIs show business activity remains solid

PMI indices showed some signs of moderation in June. The composite PMI decreased from 56.8 in May to 55.7 in June, below consensus expectations (56.6). The PMI’s forward-looking components remained pretty strong in June, with some bright spots in new orders and employment. On average, composite PMI in Q2 was the highest in six years […]

Security in a digital world

We live in a digital world where security threats are proliferating and becoming more sophisticated. The Summer 2017 issue of Pictet Report, examines the nature of these threats and various aspects of online security. On a personal level, people find hackers trying to access their personal information online for criminal purposes. Commercial organisations and public […]

Japan’s tight jobs market may still show up in inflation

    The unemployment rate dropped to 2.8% in April 2017, the lowest in more than two decades, with 148 jobs for every 100 job seekers, a level that has not been seen since the early 1970s. What’s puzzling, however, is that the tightness in the labour market appears to have put very little pressure […]

Swiss National Bank in wait-and-see mode

At its June meeting, the Swiss National Bank (SNB) left its accommodative monetary policy unchanged. The interest rate on sight deposits was maintained at a record low of -0.75% and the SNB reiterated its willingness to intervene in the foreign exchange market if needed. Our baseline scenario remains unchanged. We expect the interest on sight […]

Fed on the road to normalisation, People’s Bank of China stands pat

As was widely expected, the Federal Reserve decided at latest policy meeting on June 14 to raise the Fed funds rate target range by 25bp to 1.0%-1.25%. The Fed appeared relatively upbeat on the economy, downplayed the recent weakness in inflation numbers and left unchanged its median projections for Fed funds rates – one more quarter-point hike […]

Monthly Investment Strategy Highlights, June 2017

Asset allocation Markets have continued to rally on strong fundamentals. It has been important to stay invested, and we continue to favour DM equities. However, markets appear unduly complacent, and we have taken advantage of current low volatility to scale back our risk exposure. We reduced our equity overweight in June by selling part of […]

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