15 Sep 19: Chief Economist´s Comment - Sunday Wrap

• Very briefly provide the global backdrop.
• Discuss Thursday’s ECB decision and why markets got confused.
• Reflect on the prospect of fiscal easing in the key country, namely Germany.

12 Sep 19: Chart of the Week - German car production should pick up

• This chart shows that the decline in German car production started in 2017 and continued through August 2019. In the last 12 months (LTM) ending August 2019, car production in Germany was down to a level close to that of September 2009, which was during the financial crisis, and is significantly below the peak of roughly 5.7mn units in 2015-17.
• According to the latest available data from VDA,...

08 Sep 19: Chief Economist´s Comment - Sunday Wrap

• To be sure we start on the same page, I’ll first – very briefly – remind you of my “big picture” from where today’s story is going to flow.
• Brexit is not the most important determinant for European and global growth, but it is the most extreme example of the implosion of politics in the aftermath of nativist governance. This past week, UK politics took an important turn. I’ll summarize why that has...

06 Aug 19: Chart of the Week - Sentiment among foreign investors is a key driver for BTPs

• Our Chart of the Week shows how non-resident investors are key for the performance of Italian government bonds. While foreign holdings of Italian government debt have declined over time, we estimate that they still represent almost 30% of the total Italian marketable debt (around 24% excluding round-trip investors), or EUR 600bn (around EUR 485bn excluding round-trip investors), which is...

26 Jul 19: Chart of the Week - Baltic Dry Index: A (mis)leading indicator?

• We are currently facing a range of very different messages concerning the global economic outlook coming from a number of indicators. While the eurozone manufacturing PMI and the Ifo index recently delivered very negative readings, our own proprietary indicator, as well as other leading indicators, are more constructive. The latest signals from the Baltic Dry Index (BDI) are even at the optimistic...

24 Jul 19: CEE Quarterly - Zentralbanken kämpfen gegen den Abschwung (3Q19)

Übersetzung der englischen Originalversion vom 27. Juni 2019

• Das Wirtschaftswachstum in CEE dürfte sich nach einem starken 1Q19 aufgrund des schwächeren Wachstums des Handels in der Eurozone, den USA und der Weltwirtschaft verlangsamen.
• Die EU-CEE-Region dürfte 2019 um 3,6% und 2020 unter dem Potenzial (2,8%) wachsen. Die westlichen Balkanländer dürften sich mit einem Wachstum von rund 3% im Jahr...

24 Jul 19: Economics Thinking - French pension reform: Greater fairness would boost financial sustainability

• In France, the high commissioner in charge of drafting the pension reform promised by President Emmanuel Macron, Jean-Paul Delevoye, has presented his recommendations to the government. These recommendations represent a step in the right direction towards establishing a pension system that is in line with best practices in Europe.
• In this paper, we look at the key features of France’s current...

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

Please note that this is the last issue before the summer break. We expect to resume on 1 September 2019.

• I’ll first discuss the key parameters for how to think of the possibility of a “post-multilateralism” world.

• I’ll then turn to the UK, where Boris Johnson is almost certain to become prime minister on Tuesday. Rather than being a turning point for the UK, it’ll likely mark one further step...

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.

11 Sep 19: Rates Perspectives - ILBs pay higher Z-spreads than nominal bonds: We discuss the main drivers

• In the current environment of low rates, finding yield enhancement opportunities is as appealing as ever. ILBs tend to trade with a pickup relative to nominal bonds. In this note, we examine the key drivers behind this differential.
• With some easy calculations, we show that this pickup depends on a liquidity premium, on a credit risk premium and on the inflation risk premium of swap inflation...

06 Aug 19: Chart of the Week - Sentiment among foreign investors is a key driver for BTPs

• Our Chart of the Week shows how non-resident investors are key for the performance of Italian government bonds. While foreign holdings of Italian government debt have declined over time, we estimate that they still represent almost 30% of the total Italian marketable debt (around 24% excluding round-trip investors), or EUR 600bn (around EUR 485bn excluding round-trip investors), which is...

24 Jul 19: CEE Quarterly - Zentralbanken kämpfen gegen den Abschwung (3Q19)

Übersetzung der englischen Originalversion vom 27. Juni 2019

• Das Wirtschaftswachstum in CEE dürfte sich nach einem starken 1Q19 aufgrund des schwächeren Wachstums des Handels in der Eurozone, den USA und der Weltwirtschaft verlangsamen.
• Die EU-CEE-Region dürfte 2019 um 3,6% und 2020 unter dem Potenzial (2,8%) wachsen. Die westlichen Balkanländer dürften sich mit einem Wachstum von rund 3% im Jahr...

23 Jul 19: FX Perspectives - HUF: No, it´s not undervalued

• In this note, we consider a macro fundamentals-based equilibrium exchange rate model for the trade-weighted real effective exchange rate (REER) of the Hungarian forint.
• We find that variables such as productivity (compared to the eurozone), net foreign direct investment and government debt (both expressed as a percentage of GDP), terms of trade (TOT) as well as real interest rate differentials...

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...

24 Jul 19: CEE Quarterly - Zentralbanken kämpfen gegen den Abschwung (3Q19)

Übersetzung der englischen Originalversion vom 27. Juni 2019

• Das Wirtschaftswachstum in CEE dürfte sich nach einem starken 1Q19 aufgrund des schwächeren Wachstums des Handels in der Eurozone, den USA und der Weltwirtschaft verlangsamen.
• Die EU-CEE-Region dürfte 2019 um 3,6% und 2020 unter dem Potenzial (2,8%) wachsen. Die westlichen Balkanländer dürften sich mit einem Wachstum von rund 3% im Jahr...

09 Aug 19: Sector Report - No-deal Brexit: The impact on our corporate and bank coverage in a worst-case scenario

• As the probability of a no-deal Brexit (on 31 October) has increased in recent weeks, we revisit the risks the corporates and banks in our coverage could face in such a worst-case scenario.

* Our economists have now assigned a no-deal Brexit a probability of 40%. The most exposed sectors are Automobiles & Parts, Aerospace & Defense, the airline sector and the UK banking sector.

* However, all...