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Italian government sticks to its 2019 deficit plan

In a letter to the European Commission on 13 November, the Italian government confirmed that it would aim for a budget deficit at 2.4% of GDP in 2019 and reasserted its real growth forecast of 1.5% for next year. Rome made only minor concessions to Brussels’ demand that it revise its fiscal plan. It committed […]


One-time Remain advocate, Jo Johnson (brother of leading Leave campaigner Boris), resigned from his position as minister of transport in protest at Theresa May’s handling of Brexit negotiations. Johnson’s departure signals an increased risk of no deal or a second referendum in our view, with a high level of uncertainty around the outcome persisting. Sterling’s […]

Euro area’s fiscal policy to turn supportive of growth next year

Euro area member states have all submitted their 2019 Draft Budgetary Plans (DBP) to the European Commission (EC) by now. These show that, collectively and based on EU Commission’s autumn forecasts, the euro area’s fiscal stance1 will turn supportive in 2019, although it varies significantly from one country to the next. Germany, Italy and the […]

Rising healthcare costs continue to be a hot-button issue in US politics

Healthcare policy was a key theme in the midterm elections and it seems that Democrats capitalised on this popular anxiety better than Republicans (they gained enough seats in the House of Representatives to secure a majority). Indeed, one of President Trump’s key failures over the past two years has been around healthcare policy. The Congressional […]

China’s days of current account surplus may be behind it

Over the first three quarters of this year, China ran a current account deficit of USD12.8 billion. It looks likely that China will see its first full-year current account deficit in over two decades in 2018. We believe that China’s current account position is going through structural change, driven by two trends. The first is […]

Trump fails to upset the law of (midterm) gravity

As predicted, Democrats gained enough seats in the House to form a majority (their first since Barack Obama’s first term). As also expected by polls, they lost seats in the Senate, where they remain a minority. With a Congress that will likely be gridlocked, legislation, including tax legislation, is likely to be meagre, leaving the […]

Japan services PMI rebounds strongly in October

The Japanese services purchasing managers index (PMI) rose sharply in October, surging by 2.2 points to 52.4, after a notable drop in September. The manufacturing PMI rose as well, but more moderately, reaching 52.9 in October from 52.4 in September. The rise in services PMI suggests domestic demand remains solid. On the one hand, household […]

US employment and wage growth continue to shine

US employment grew by 250,000 in October (+1.7% y-o-y); the 3-month average is now a solid 218,000/month, and October payroll results were strong, which bodes well for US GDP growth in Q4. It appears therefore that the US’ heated rhetoric towards China is having little effect so far on the US economy. The mere fact […]

Weekly View – Temporary relief

Several factors halted the equity sell-off last week. Investors continued to take a jaundiced eye of some corporate guidance, but Q3 earnings growth has finally turned out as good as in previous quarters (around 25% year on year for the S&P 500).  The sky has seemed to brighten on other fronts too. Most conspicuously, oil […]

Gridlock in Washington and the markets

The US midterm elections take place on Tuesday 6 November. Based on recent polls, the most likely outcome is that the Democrats will regain a small majority in the House of Representatives, while the Republicans keep a small majority in the Senate. Should the Democrats take control of the House, Washington D.C. could be back […]

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