Eurozone: inflation falls once again. The business climate continues to deteriorate in Germany. / US: Q2 growth revised up slightly. In July, durable goods orders were strong, but consumption was disappointing. / Brazil: in recession. / Markets: European sovereign-bond yields and the euro continue to slide. Equity markets rebound.Read more Add to my documents Remove this selection
Weekly 29th August 2014
Monetary policy and economic recovery remain the key factors
The downward revision of US growth confirms the view of the “doves” at the Federal Reserve and all those who, like us, expect interest rates to remain low. Meanwhile, the Argentine debt crisis has retaken centre stage and default risks have re-emerged; however, the risk of global repercussions is still minimal. Our allocation maintains pride of place for equities, particularly from the eurozone.Read more Add to my documents Remove this selection
ECB: from the role of lender of last resort to one of buyer of last resort?
Questions about the tools, effectiveness and objectives of monetary policy are being debated again in the eurozone. The measures announced by the ECB are aimed at lowering finuancing costs, diversifying the sources of funding for businesses and lifting the constraints that are weighing on the supply of bank lending. However, it cannot be said that once these constraints are lifted, deflationary pressures will dissipate.Read more Add to my documents Remove this selection
Investment flows have changed considerably since last year
Last year, saw three major flow trends: a shift from bonds to equities, from investment grade to high-yield and from emerging markets to the developed countries. Some months later, this landscape has again considerably changed. Great rotation to equities has reversed, momentum of high yield has greatly abated and emerging assets interest is reviving.Read more Add to my documents Remove this selection
Mario Draghi's remarks at Jackson Hole (August 24) signal new policy course.First (and this is the markets' takeaway), by signalling a decisive erosion in inflation expectations,the ECB Chairman is opening the door to outright purchases of sovereign bonds financed by money creation (QE).
Co Head of Strategy and Economic Research at Amundi
THOUGHT OF THE DAY
According to Eurostat, the debt-to-GDP ratio in the Eurozone reached 93.9% in Q1 2014. In the following chart, we represent the debt-to-GDP change over 4 quarters since 2001 and the three underlying factors explaining this change: the primary balance, the differential between interest rate and nominal GDP growth and the debt-deficit adjustment. This is striking that the main contribution of the evolution of the debt-to-GDP ratio comes from the differential between the interest rate and the nominal GDP growth. This highlights how deflation/lowflation is a threat for debt sustainability in Europe.
ANALYSIS AND OUTLOOK
Strategy and Economic Research at AmundiRead more
Uncertainty in financial markets makes portfolio diversification a valuable tool to navigate difficult market conditions. Diversification is probably the only free lunch in finance. It is closely related to asset segmentation: different representations of portfolio diversification are derived depending on what is considered the atom of asset allocation (capital / risk / factor). Probably a single measurement cannot provide a comprehensive representation.