Macroview

Policy normalisation may be delayed in Europe

The European Central Bank (ECB) does not seem overly concerned about the soft patch in the economy in Q1 and appears willing to collect more data before they start discussing the timing and modalities of the next policy steps. We expect the ECB to hint at an imminent end to asset purchases at its June […]

US chart of the week – Shaky ground

US construction is doing broadly fine, echoing the solidity of the US business cycle. On a y-o-y basis, construction was up 3.9% in March and 5.5% y-o-y in Q1 2018. Construction outperformed nominal GDP, which was up 4.8% y-o-y in Q1. The main engine is the residential market, up 7.8% y-o-y in Q1. Nonresidential construction […]

Euro area growth: somewhere between hard and soft data

Euro area real GDP expanded by 0.4% q-o-q in Q1, or 1.7% in annualised terms, according to Eurostat’s flash estimate. This comes after an upwardly revised figure of 0.7% q-o-q in Q4 2017. Although this first estimate could be subject to statistical revisions, it confirms that the euro area economy lost some momentum in Q1. […]

On the lookout for further rise in 10-year yield

The 10-year Treasury yield broke through the key 3% threshold last week– as we had expected it would at some stage in our central scenario. We are sticking to this central scenario, which sees the 10-year Treasury yield ending the year at around 3%, but with some spikes above this level in Q2 and Q3 […]

M&A buoyant so far this year

So far this year equity returns have been fairly disappointing and market volatility has significant increased compared with 2017. However, disappointment has been driven neither by poor economic conditions nor by a worsening of company fundamentals, and mergers and acquisitions (M&A) remain supportive. The acceleration of M&A in some regions illustrates that investor sentiment is […]

Bank of Japan stays put, as expected

At its latest monetary policy meeting on April 27, the Bank of Japan (BoJ) decided to keep its current monetary easing programme intact. Under its yield curve control (YCC) policy, the BoJ applies a negative interest rate of -0.1% to the policy-rate balances in the current accounts held by financial institutions at the Bank, and […]

Deceleration in US GDP growth should prove transitory

US Q1 GDP grew 2.3% q-o-q SAAR, slowing from 2.9% in Q4. Part of the deceleration was due to ‘residual seasonality’, we think, and was therefore technical. We expect US private consumption to rebound sharply in Q2, and, with investment growth likely to stay firm, we think Q2 GDP growth could head towards 3.5-4.0%. The […]

Euro weakness should prove temporary

Over the past 10 days, the euro has declined significantly against the US dollar. On 26 April, the EUR/USD rate moved below the low of its 1.2150-1.2550 trading range, which had been in place since 18 January. Reasons for this decline can be found in the growth differential and monetary policy divergence. Indeed, moderation in […]

Europe chart of the week – public debt

This week’s Eurostat releases revealed that public finances continue to improve in most euro area member states. As a result of falling deficits, low interest rates and stronger nominal growth, the ratio of euro area government debt to GDP fell to a six-year low of 86.7% in Q4 2017. Although sovereign debt sustainability remains shaky […]

The ECB’s steady hand

Another ECB meeting, another balanced message of confidence and prudence. Unsurprisingly, the statement today mentioned the deterioration in the data flow since March, but our impression is that the ECB is largely brushing off concerns about a soft patch in the economy for the moment. ECB president Mario Draghi said that the Governing Council did […]

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