Euro Area

Slowing manufacturing PMI indices globally indicate the slowdown in economic activity will persist. Manufacturing demand for commodities will also soften, weighing on industrial commodity prices. Geopolitical tensions and the race to the green energy transition will upend enmeshed global supply chains, which will also impact manufacturing activity. It is possible that stimulus in China will arrest the decline in the state’s manufacturing activity, which will have positive spillover effects to its key trading partners.   

It is easy to claim that the ECB is failing in light of today’s elevated inflation readings. Yet, the reality is more subtle and the ECB’s performance lays the ground for stronger growth ahead.

In this report, we follow up on the upgrade to our US duration stance from last week with a review of our rates views and government bond allocations outside the US. We conclude that while we now find US Treasuries to be more attractive from a value perspective, even better value is available in euro area and UK government debt.

Now that the French pension reforms have been passed, President Macron’s focus will be on the international stage. Where are the risks and opportunities for French assets created by this pivot?