Macroview

Still no sign of a US ‘manufacturing renaissance’

The Bureau of Economic Analysis recently released data for US GDP by industry for Q4 2017, providing a good opportunity to examine how US manufacturing is doing. The answer is: still not so well. Manufacturing accounted for 11.6% of US GDP in Q4 2017, the same as a year earlier but well below levels in […]

Where next for oil prices?

Oil prices have surged to their highest levels since 2014 (USD69.56 for West Texas Intermediate (WTI) on 19 April and USD75.27 for Brent on 24 April ). They are now USD6 to USD9 above our calculation of their long-term fundamental price equilibrium. Three factors explain the current price premium: Geopolitics: Between Saudi Arabia’s Prince Mohammed […]

Spreads for investment grade credits torn in different directions

Although US investment grade (IG) and euro IG have posted a negative total return so far this year, credit continues to offer interesting yield pick-up for investors (especially in euro). Overall, we are neutral on prospects for US and euro IG over the coming 12 months. We see US and euro credit yields rising due […]

US growth update: Let’s ignore Q1 GDP

The Bureau of Economic Analysis will release the preliminary estimate of Q1 GDP growth on 27 April. Currently Q1 growth is tracking around 2% q-o-q (annualised), a deceleration from 2.9% in Q4-2017. We think this slowdown is transitory and does not reflect the underlying growth trend; we expect some solid catch-up in Q2. We are […]

Euro area core inflation to rise again after Easter

The ECB’s Governing Council may have to wait a little longer to get a clearer view of where euro area core inflation is heading in the near term. The early timing of Easter this year has made travel-related services prices more volatile. Another reason is that an unexpected drop in core goods inflation has fuelled […]

ECB policy: Stop Worrying and Love the Soft Patch

We see little incentive for the ECB to change its broad assessment of the economic situation at the 26 April meeting. The normalisation of the monetary stance will continue to be dictated by the ECB’s guiding principles of confidence, patience, persistence, prudence and gradualism. Talk is cheap, and Mario Draghi could still put more emphasis […]

Japanese equities bolstered by the Bank of Japan

Japanese equities received net inflows in March. Nevertheless, foreigners were net sellers – with the highest monthly net foreign redemptions in the past 18 months. Thanks to the Bank of Japan’s (BoJ) purchases of Exchange Traded Funds (ETFs), there have still been net inflows into Japanese equities despite the strong foreign outflows. The BoJ is […]

China growth sustained in Q1 but moderation expected through 2018

Chinese GDP in Q1 2018 came in at Rmb19.9 trillion (about USD3.2 trillion), rising 6.8% year-over-year (y-o-y) in real terms. The growth rate is the same as in H2 2017 and beats the market consensus (6.7%) and our own forecast (6.6%). Details of the GDP report show strong signs of economic rebalancing. Traditional drivers of […]

Russian rouble: significantly undervalued but quite risky

On 6 April, the Trump Administration announced additional and more severe sanctions against Russia “in response to the totality of the Russian government’s ongoing and increasingly brazen pattern of malign activity around the world”. These sanctions confirm a tougher stance of the US Congress against Russia. Following the announcement, the Russian rouble depreciated significantly against […]

US chart of the week – Two-tier job market

The latest release of the Atlanta Federal Reserve series on median wage growth provides interesting clues about the current US wage puzzle – i.e. the question why US wage growth remains tame despite the very tight labour market (the unemployment rate was only 4.1% in March). Of particular interest is the widening gap between wage […]

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