At its latest meeting in December, the ECB turned more cautious, lowering its growth forecasts but showing no sign of panic regarding the loss in euro area economic momentum. Risks were considered as “broadly balanced”, but moving to the downside. Since the December monetary policy meeting, data (PMI and national surveys, industrial production) have deteriorated […]
This week, the British Parliament rejected Theresa May’s divorce deal en masse. At the same time, she has kept enough support to stay in power, as a motion of no confidence was rejected. How the Brexit process unfolds from now remains highly uncertain. The recent turn of events means there is an increasing probability of […]
After a year when peripheral countries’ old demons made a reappearance, with, in particular, Italy’s public debt back in the spotlight, the focus should shift to economic fundamentals in 2019. Both the Spanish and Italian economies are set to slow down, although the situation is more serious in Italy. In both countries, the political equilibrium […]
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 […]
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