Zona Euro
The Chinese government will repress social unrest, then relax Covid-19 social restrictions to try to stabilize the economy. Russia will be aggressive in the short term but will pursue a ceasefire before March 2024. European and Italian risk will stay high on energy constraints.
European asset prices have rebounded sharply since September. Can this trend survive in the face of a weak Chinese economy where deflation prevails?
In this Special Report, we consider what some common monetary policy rules are recommending for the major central banks and derive conclusions on duration strategy and country allocation for bond investors. We conclude that rate hike expectations in most countries may appear appropriate given the current global backdrop of high inflation and low unemployment, but look elevated on a forward-looking basis versus slowing global growth and peaking global inflation.
What is the outlook for the European housing market amid rising mortgage rates and the energy crisis? Does housing represent a systemic risk? Can households weather the storm? And what are the opportunities, if any?
Our 4Q22 and 2023 Brent forecasts remain at $100/bbl and $116/bbl. Upside price risk continues to dominate oil markets. We remain long the XOP and COMT ETFs to retain exposure to oil and gas producers’ equities, and higher commodity prices and further backwardation, particularly in copper.
The decline in the US CPI is a tailwind for European stocks, but does it compensate for weaker global growth?
Europe is hampered by a lower trend growth rate, but has room to grow faster than the US over the next two years. How can investors profit from this outlook?
This week’s report examines the state of the global monetary tightening cycle and addresses some frequently asked questions about the Fed’s QT program. New yield curve trades are recommended for the US and German yield curves.
Stay short Greater China assets. Stay long Japanese yen. Hold back on Brazil for now but look forward to opportunities in future.
The ECB increased interest rates and announced the start of its balance sheet wind down; yet, markets took the news as a dovish outcome. Are we really getting close to the end of the ECB’s tightening campaign? How asset prices will react?