Eurozone: Preliminary PMI indices disappoint in August. /United States: Continued improvement in the real estate market. /China: Unexpected drop in HSBC Manufacturing PMI as real estate activity slows. /Central banks: Prospect of rate hikes by BoE, before the Fed. /Markets: US dollar up sharply and US stock market at an all-time high.Read more Add to my documents Remove this selection
Weekly 22th 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
A communication from the Fed made more difficult. If the publication of the FOMC's minutes of 30 July show anything, it is that FOMC members are increasingly bothered by the way they have to talk about the US labour market. With the strong decline in unemployment over the past three years, FOMC members have had to wipe any mention of "high unemployment" from their press release, saying instead that "a range of labour market indicators suggests that there remains significant underutilization of labour resources." The minutes show that these semantic changes are not problem-free, because it would even be difficult to preserve this somewhat watered-down characterisation of the labour market "if the improvement in the labour market continues to be more rapid than anticipated." Overall, the minutes show that the FOMC is increasingly divided as regards the way to communicate on labour market topics.
Strategy and Economic Research at Amundi
THOUGHT OF THE DAY
The contraction in industrial output in Q2 (-1.5%) has wiped out Q1’s expansion (+1.1%), leaving output down 0.5% yoy. The Bundesbank has already indicated that Q2 GDP growth was close to zero in Q2 (i.e. close to 1.5% yoy) and we cannot rule out a small contraction in economic activity last quarter (Q2 GDP will be released on 14 August). The fact that growth has slowed is not a big surprise after the strong performance (+0.8%) seen in Q1. However, the slowdown is stronger than expected, partly due to weaker exports (German exports to Russia have fallen since the beginning of the year).
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.