Last week, political tensions in Italy intensified as Matteo Salvini, the League’s leader triggered a no confidence vote against Prime Minister Giuseppe Conte. PM Conte will address the Senate on 20 August. A confidence vote will likely follow the speech, though further delays remain a possibility. Once the government dissolves, the President of the Republic […]
The world is being disrupted by structural trends such as populism, demographic and climate change and technological innovation. Likewise, with previous approaches producing fewer results, we believe it is time to envisage monetary policies that address these sources of disruption more directly. We observe five different phases of monetary policy making since 1980. Combating inflation […]
The German economy shrank by 0.1% quarter-on-quarter (q-o-q) in Q2. Today’s report contained some positive news, notably regarding the resilience of domestic demand. Nevertheless, the ongoing trade disputes between China and the US, China weakness, the threat of auto tariffs and the threat of a no-deal Brexit to supply chains, in addition to the auto […]
Due to renewed trade tensions, the S&P 500 corrected by 6.0% and the Stoxx Europe 600 by 5.8% from the late July peak to the 5 August low. Because the pullback was clustered around just a few days, its intensity was reminiscent of the worst market days of past major crises. Safe-haven assets benefited significantly, with gold […]
The knock-on effects of Trump’s tweets have jumped from the equity and bond markets to the economy to central banks and now currency markets. Indeed, the trade war turned tech war now increasingly resembles a currency war and a race to the bottom. The Chinese currency depreciated below CNY 7/USD after the Chinese authorities seemingly […]
The increased trade tensions following Trump’s 1 August tweet threatening additional tariffs on Chinese goods has boosted the gold price above USD 1,500 per troy ounce. The recent developments are supportive of gold investment demand because of a lower opportunity cost associated with holding gold and greater demand for safe-haven assets. Coupled with strong demand from central banks, the […]
Shortly after the renminbi’s sharp depreciation on Monday, the US Treasury Department labelled China a currency manipulator. This is the first time in 25 years that the US government has designated a country as a currency manipulator. According to the US Treasury Department, the decision was triggered by the perceived lack of action by the PBoC to resist […]
Following US President Donald Trump’s announcement of a new 10% tariff on USD300 billion of Chinese goods, the Chinese renminbi (rmb) weakened sharply and breached CNY7.00 per USD. The recent rmb move, in our view, represents a major shift in the People’s Bank of China’s (PBoC) currency policy, reflecting the deteriorating outlook for trade negotiations with the US and […]
At its monetary policy meeting on 30 July, the Bank of Japan (BoJ) decided to keep its monetary policy unchanged, as expected. The decision came as the Japanese economy faces strong external headwinds and a downbeat outlook for domestic demand. However, we do not expect the BoJ to make any changes to its current monetary easing framework until H1 […]
Asset allocation While dovish central banks have resulted in an impressive ‘everything rally’ this year, we now need to see an improvement in fundamentals, as 12-month forward earnings for global equities are still 2% below their highs of October 2018. We therefore remain generally cautious on equities, waiting for a correction before we increase exposure. […]
