Asset Allocation After a bruising 2018, we expect further volatility ahead. But the recent sell-off in equities, particularly in the US, may have been excessive with regard to still-decent fundamentals. We will continue to use spikes in volatility for tactical advantage, believing they offer opportunities. We are cautious on corporate credit overall as leverage, increasing […]
The People’s Bank of China (PBoC) announced a further reduction in banks’ required reserve ratios (RRR) on Friday by 1 percentage point. According to the central bank, this round of RRR cuts will inject roughly Rmb800 billion of net liquidity into the banking sector. In our view, this move was partly motivated by the economy’s […]
Fed Chairman Jerome Powell made dovish remarks at a conference on Friday to the effect that the Fed would be ‘patient’ about further rate increases after having delivered four rate hikes in 2018. Crucially, Powell mentioned possible tweaks to the Fed’s preset plans for balance sheet shrinkage to calm financial markets concerns, after downplaying the […]
The first week of the year delivered a series of conflicting signals and a complementary dose of volatility in markets. After 20 days of daily moves of over +/-2% in the S&P 500 in 2018, out of last week’s three trading days of 2019 alone, two were marked by daily moves of over +/-2%. In […]
The official Chinese manufacturing purchasing manager indices (PMIs) came in at 49.4 in December, down from 50 in November and below the recent trough in early 2016. This brings PMI survey results below the crucial level of 50, entering contraction territory. The sharp deceleration was evident for both large enterprises and small- and medium-sized enterprises […]
The Federal Reserve (Fed) raised the Fed funds target range (FFTR) by another 25 basis points (bps) on 19 December, as widely anticipated. The new FFTR range is 2.25-2.50%. This marked the fourth rate increase of 2018. There was no formal guidance about the next hike and clues were rather hazy. It seems like the […]
Following the Trump-Xi dinner on 1 December, there are signs of goodwill on both sides, leaving the impression that a ‘mini deal’ is possible before the 1 March 2019 deadline set by the US. This could push back the threat of additional tariffs in the very near term. But we think the devil will be […]
In our central scenario, we expect the 10-year Bund yield to rise gradually to 0.8% by the end of next year from 0.26% on 17 December. Underpinning this upward movement is our expectation of a cumulative deposit rate hike of 40 basis points (bps) by the ECB, against current market expectations of only 10 bps. […]
The Federal Reserve (Fed) is widely expected to increase the Fed funds target range (FFTR) by another 25 basis points (bps) on 19 December, marking the fourth rate increase of 2018. This increase would push up the new FFTR range to 2.25%-2.50%. The focus will be on the rate guidance for 2019, including the one […]
In an attempt to quell the widespread unrest and disruption caused by the “gilets jaunes” protesting against fuel tax rises, French president Emmanuel Macron announced a fiscal plan to the tune of EUR10bn. Without countermeasures, this spending increase will push France into a deficit of above 3% in 2019, to as high as 3.4%. As […]
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