Economic data came in weaker than expected last week, especially in China and Europe, and we can anticipate messy forthcoming US data, given the ongoing US government shutdown. In China, manufacturing survey readings dropped into contraction territory, which together with hard data points toward continued growth deceleration in China’s imports and exports. At the same […]
After battling for more than two months over a 2019 budget plan defiantly non-compliant with the EU fiscal rules, Rome and Brussels struck a last-minute agreement in December that avoided opening an Excessive Deficit Procedure (EDP). To avoid the EDP, Italy had to backtrack on parts its initial plans for fiscal expansion to reduce the […]
The British parliamentary vote on Theresa May’s EU divorce deal will be on 15 January. The deal is likely to be rejected, as there has been little progress since December, when a first vote was called off for lack of support. The problem is that there remains no majority for any alternative. If there is […]
German industrial production (including construction) fell by 1.9% month-on-month in November, extending the sector’s decline to five out the six last prints. Year on year, industrial production was down by 4.6%, the worst performance since November 2009. While some idiosyncratic factors were likely at play, such as below-average water levels on the Rhine, which may […]
The Fed’s interest-rate tightening since Q4 2015 has had divergent repercussions on interest rates paid by ‘end users’ across the US economy. Interest rates on credit card debt have risen particularly sharply since the start of Fed tightening. How monetary policy is transmitted to the ‘real economy’, including consumers and small businesses, remains a blind […]
Last year was a difficult one for euro credit, with both the ICE Bank of America Merrill Lynch (ICE BofAML) investment grade (IG) and high yield (HY) indices posting negative total returns. This was entirely due to wider credit spreads, as medium-term German government bonds yields fell slightly. Looking back, policy makers had a major […]
Asset Allocation After a bruising 2018, we expect further volatility ahead. But the recent sell-off in equities, particularly in the US, may have been excessive with regard to still-decent fundamentals. We will continue to use spikes in volatility for tactical advantage, believing they offer opportunities. We are cautious on corporate credit overall as leverage, increasing […]
The People’s Bank of China (PBoC) announced a further reduction in banks’ required reserve ratios (RRR) on Friday by 1 percentage point. According to the central bank, this round of RRR cuts will inject roughly Rmb800 billion of net liquidity into the banking sector. In our view, this move was partly motivated by the economy’s […]
Fed Chairman Jerome Powell made dovish remarks at a conference on Friday to the effect that the Fed would be ‘patient’ about further rate increases after having delivered four rate hikes in 2018. Crucially, Powell mentioned possible tweaks to the Fed’s preset plans for balance sheet shrinkage to calm financial markets concerns, after downplaying the […]
The first week of the year delivered a series of conflicting signals and a complementary dose of volatility in markets. After 20 days of daily moves of over +/-2% in the S&P 500 in 2018, out of last week’s three trading days of 2019 alone, two were marked by daily moves of over +/-2%. In […]
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