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 […]
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 […]
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 […]
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 […]
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 […]
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. […]
The Federal Reserve (Fed) is subtly turning more hawkish, mostly due to its increased confidence in the US outlook. While the Fed’s ‘dot plot’ chart (which illustrates the central bank’s rate hike projections) was unchanged in September from June, we think the chart’s message that there will be three Fed rate hikes next year should […]
The Italian government’s budget deficit target is 2.4% for each of the next three years. It could have been worse: at one stage, the populist coalition’s spending plans looked like raising the deficit to 6%. But its actions set the stage for a clash with Brussels, while Italy’s credit rating could be downgraded in the […]
Leaders of Italy’s coalition government and the finance minister yesterday agreed on a 2.4% GDP deficit target. The new target is higher than our expectation of a deficit “above but close to 2.0%” in 2019. For us, the key issue is not so much the deficit figure in itself, but more the fact that the […]
The French economy disappointed in the first half of this year. While there was a widespread ‘soft patch’ in the euro area, the source and size of the slowdown in France stands out. The real GDP growth rate fell by 0.5 points, much more than the rest of the euro area. Moreover, while the slowdown […]
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