16 Jul 19: Chart of the Week - Italy’s productivity gap: Size matters

• Italian firms are commonly perceived as being less productive than their best-in-class eurozone peers. A lower propensity to innovate, to adopt frontier technologies and to invest in human and physical capital, along with a number of bureaucratic and regulatory hindrances, limit the ability of Italian firms to grow and compete globally. While such perception might be justified for the services and...

14 Jul 19: Chief Economist´s Comment - Sunday Wrap

• The latest communication from the Fed and the ECB and why they are right that policy stimulus is appropriate.
• Yet, as the ECB is set to ease further, the negative side-effects for banks – thereby weakening the all-important transmission mechanism – will become increasingly problematic because of the complexity of designing appropriate mitigating measures.
• Therefore, a rethink of the policy imbalance...

12 Jul 19: Chart of the Week - The US labor market is not “hot”

• Fed Chairman Jerome Powell’s unambiguously dovish remarks this week, backed up by the June FOMC minutes, means a rate cut at the end of this month is effectively a done deal. The relatively sharp shift in Fed communication over the last couple of months may be surprising, particularly given the strong jobs market. But our Chart of the Week shows that even this bright spot of the US economy – the...

07 Jul 19: Chief Economist´s Comment - Sunday Wrap

• What the selection of this new European leadership team illustrates in terms of the shifting powers within Europe.
• Christine Lagarde at the ECB: The challenges ahead, Part I.
• Ursula von der Leyen at the Commission: What to look out for.

04 Jul 19: Chart of the Week - Italy is the only country whose share of negative-yielding bonds has declined

• In late 2011, the yield on a German nominal government bond turned negative for the first time. Today, more than 60% of the outstanding volume of euro-denominated government bonds are trading at yields lower than zero percent.
• Our Chart of the Week shows the volume share of negatively yielding euro-denominated nominal government bonds for a large sample of euro area sovereigns in relation to their...

30 Jun 19: Chief Economist´s Comment - Sunday Wrap

• Economics, monetary policy signals and the amazing markets: Will the tricks continue to work?
• Politics: The Trump-China truce at the G20, European leadership nominations, and Brexit in the balance.

28 Jun 19: Economics Thinking - Assessing global and regional imbalances

This paper also appears in the CEE Quarterly – Central Banks fighting the downturn (3Q19) as a longer version with CEE specifics.

• External imbalances – and the rapid unwinding of them – have historically played a key role in triggering economic and financial crises. In this paper, we examine the current state of imbalances at the country-level, regionally and globally.
• Our starting point is that...

27 Jun 19: CEE Quarterly - Central banks fighting the downturn (3Q19)

• Economic growth is likely to slow in CEE after a strong 1Q19 due to weaker eurozone, US and global trade growth.
• EU-CEEis likely to grow by 3.6% in 2019 and below potential (2.8%) in 2020. Western Balkans are likely to perform slightly worse, with growth around 3% in 2019 and 2.5% in 2020.
• Turkey’s economy probably contracted again in 2Q19 but could exit recession at the turn of the year if it...

27 Jun 19: The UniCredit Economics Chartbook - Monetary easing in the pipeline (3Q19)

• Global: We are slightly lowering our global growth forecast for this year to 3.1% from 3.2% while maintaining our estimate of 2.7% growth in 2020. The downward revision reflects higher macroeconomic uncertainty in the form of renewed trade tensions between the US and China. In our baseline scenario, we assume there will be another round of trade talks; this might reduce tensions, although...

18 Jun 19: Chart of the Week - Inflation expectations in the eurozone: Markets and the real economy disagree

• Market-based measures of inflation expectations in the euro area are in free fall. The 5Y5Y inflation swap, which measures inflation expectations over the five-year period starting five years from now, entered a steep declining trend at the end of 2018 and recently fell to an all-time low below 1.15%. Together with rising downside risks to the growth outlook, this has put pressure on the ECB.
• Howev...

16 Jun 19: Chief Economist's Comment - Sunday Wrap

• The causes and effects of this bizarre state of affairs of the world’s second most important currency not having an underlying safe asset, which contributes to the now record low – negative – yields.
• And I’ll briefly reply to those who questioned my statement last Sunday that the euro has nothing to do with Italy’s poor growth performance.

12 Jun 19: Chart of the Week - Uncertainty is bad for trade

• Uncertainty causes businesses to defer trade and investment. Our Chart of the Week shows that global trade growth is closely related to business confidence. Business confidence (measured here by the OECD industrial confidence indicator and standardized to match the mean and variance of global trade growth) fell further in May. The data, which was released yesterday, is published two months ahead...

10 Jul 19: Rates Perspectives - BTPi breakeven curve: Too flat and too low

• BTPis have missed the last leg of the BTP rally and, as a result, now trade at real yields that are very close to the nominal curve.
• While investors are concerned that Italian inflation may be negatively affected by weak economic growth, current breakeven levels are well below our economists’ forecasts.
• We show how BTPis in the five-year area would fare in different inflation and real-yield...

04 Jul 19: Chart of the Week - Italy is the only country whose share of negative-yielding bonds has declined

• In late 2011, the yield on a German nominal government bond turned negative for the first time. Today, more than 60% of the outstanding volume of euro-denominated government bonds are trading at yields lower than zero percent.
• Our Chart of the Week shows the volume share of negatively yielding euro-denominated nominal government bonds for a large sample of euro area sovereigns in relation to their...

08 Jul 19: FX Perspectives - PLN and REER equilibrium: As cheap as it gets?

• We attempt to model the PLN real effective exchange rate using longer-term structural macroeconomic variables. Government debt, net foreign assets, investment spending, real interest rate differentials and share of exports to the eurozone all appear to be important factors influencing long-term valuation.
• Our models indicate that the PLN is currently undervalued by about 5% on a real exchange rate...

27 Jun 19: CEE Quarterly - Central banks fighting the downturn (3Q19)

• Economic growth is likely to slow in CEE after a strong 1Q19 due to weaker eurozone, US and global trade growth.
• EU-CEEis likely to grow by 3.6% in 2019 and below potential (2.8%) in 2020. Western Balkans are likely to perform slightly worse, with growth around 3% in 2019 and 2.5% in 2020.
• Turkey’s economy probably contracted again in 2Q19 but could exit recession at the turn of the year if it...

20 Nov 18: Shortened version of the Euro Credit Pilot (November 2018)

This is a shortened version of the Euro Credit Pilot, which we deem to be an acceptable minor non-monetary benefit under MiFID II.

• Slower economic and earnings growth will weigh on European credit markets, which will likely experience more-pronounced spread widening in 2019. However, given their more-stable debt trajectory over the last few years, as well as the ECB’s delayed tightening relative to...

15 Nov 18: UniCredit Macro & Markets - 2019-20 Outlook: Get defensive as growth slowdown looms

• Macro: Global growth is likely to moderate further to 3.4% in 2019, with the slowdown set to intensify in 2020 as the US slips into a mild recession. The Fed will probably hike rates through 1H19 and reverse course in 2020 with three cuts. The ECB will have just enough time to exit negative rates in 1Q20 before eurozone growth weakens materially.

• FI: We expect 10Y US yields to peak in the...

27 Jun 19: CEE Quarterly - Central banks fighting the downturn (3Q19)

• Economic growth is likely to slow in CEE after a strong 1Q19 due to weaker eurozone, US and global trade growth.
• EU-CEEis likely to grow by 3.6% in 2019 and below potential (2.8%) in 2020. Western Balkans are likely to perform slightly worse, with growth around 3% in 2019 and 2.5% in 2020.
• Turkey’s economy probably contracted again in 2Q19 but could exit recession at the turn of the year if it...