No massive monetary stimulus on the way from the PBoC

Over the weekend, the People’s Bank of China (PBoC) announced a cut of 100 basis points (bps) in banks’ required reserve ratio (RRR). This is the third RRR cut since April. The PBoC estimates that it will free up about Rmb 750 billion of net new liquidity in the banking system. According to the central […]

Renminbi nears a psychological threshold

Having dropped more than 5% year to date, our scenario of weaker growth in China in 2019 (we expect GDP growth to decline to 6.1% from 6.6% in 2018) is likely to further weigh on the renminbi through the interest rate differential. The Chinese current account is unlikely to provide much relief, as it has […]

Weekly View – Dancing Queen

Far-right presidential candidate Jair Bolsonaro claimed victory in the first round of Brazil’s elections on Sunday, albeit he did not obtain the over 50% of the vote required to secure a majority and avoid a run-off. Markets have grown more positive toward Bolsonaro since the start of his campaign and we think Paulo Guedes is […]

Hurricane aside, US job market is still very solid

Setting aside the impact of the hurricane that hit the Carolinas (and also the headline payroll reading as a result), the US jobs market remains in very good shape. Today’s data showed the unemployment rate dropped to its lowest level in 48 years in September (3.7%). Importantly, the nonfarm payrolls reportshowed strong employment gains in […]

German September PMIs surprisingly weak

Recent German soft and hard data in the manufacturing sector has been surprisingly weak. Data released today showed that the final manufacturing PMI fell to 53.7 in September, from 55.9 in August. Factory orders rose by 2.0% month-on-month (m-o-m) in August, having contracted for six out of the seven previous months. The increase in August […]

Time to be more constructive on high yield

We have just moved from an underweight to a neutral position on US and euro high yield bonds. Several factors underpin this relatively more constructive view. First, in spite of historically low spreads, the carry offered by high yield remains attractive and acts as a cushion at a time of rising government yields. Second, fundamentals […]

Extraordinary times for the US economy

We have long-highlighted how solid the US economy is, in line with our ongoing scenario of 3% GDP growth for the year. That strong corporate investment is driving this offers still better news, given its potential to ultimately feed stronger productivity growth. Another positive lately is that US firms’ solid optimism about investment is coupled […]

House View, October 2018

Asset Allocation We remain underweight or neutral across a number of risk asset classes and overweight liquidity in light of enduring uncertainties, but stand ready to deploy cash as tactical opportunities present themselves. We are neutral DM equities, but pockets of opportunity still exist (in the UK and Japan, for example). EM equities are becoming […]

Further consolidation of EUR/USD rate likely

We have long argued that growth and interest rate differentials are two key components for the direction of the US dollar. Both these drivers should continue to support the dollar over the short term. Indeed, economic growth in the US is likely to be strong thanks notably to an upswing in US capex but also […]

Chinese PMI data points to further growth moderation

China’s manufacturing PMIs softened further in September, indicating that growth momentum is likely to continue to moderate in Q3 and that the weakness may extend into Q4. In response to the weakening growth momentum, especially in the context of escalating trade tensions with the US, the Chinese government has since June turned to policy easing. […]

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