16 Feb 20: Chief Economist´s Comment - Sunday Wrap

• On Tuesday, Isabel Schnabel gave her second speech as ECB Executive Board member, and what a speech it was! Without a doubt, in one strike Schnabel has placed herself as a key member of Lagarde’s new ECB. I’ll discuss why that’s so – and I’ll expand on her reference to European banks.
• Rather symbolically, Schnabel gave her speech in Karlsruhe just six weeks before the German Constitutional Court...

13 Feb 20: Chart of the Week - Mapping the global spillover of coronavirus

• Our Chart of the Week aims to identify the exposure of selected countries to the economic shock in China caused by the new coronavirus. We look at two transmission channels: lower Chinese demand for goods and services, and potential supply-chain disruption. We measure exposure to China’s demand shock as the value added of each country that is embodied in Chinese domestic demand, in proportion to...

09 Feb 20: Chief Economist´s Comment - Sunday Wrap

• On Tuesday, in his State of the Union address, US President Trump claimed (questionably!) that the US has restored its undisputed global leadership role.
• On Friday, China’s all-powerful government met a new and potentially significant challenge to the legitimacy of its governance model when Li Wenliang, the Chinese doctor first persecuted for raising alarm about the new deadly coronavirus, died in...

06 Feb 20: Chart of the Week - Germany: “Kurzarbeit” set to rise further

• The latest release of the Ifo index showed that German business sentiment declined somewhat in January. While we think that a continuation of the bottoming-out in German business sentiment over the next few months is still likely, weak economic activity is set to cool the German labor market further. However, companies will probably refrain from laying-off staff and hold-on to more workers than...

04 Feb 20: CEE Quarterly - CEE: Ein Outperformer in herausfordernden Zeiten (1Q20)

Übersetzung der englischen Originalversion vom 13. Januar 2020

• Das Jahr 2020 könnte sich aufgrund des schwachen Welthandels, einer wahrscheinlichen Verlangsamung in den USA, der verschärften finanziellen Bedingungen in den Schwellenländern und der Auswirkungen, die diese Faktoren auf die Politik und die makroökonomischen Ungleichgewichte haben könnten, als ein schwieriges Jahr für die...

02 Feb 20: Chief Economist´s Comment - Sunday Wrap

• The illusion of the UK as the most dynamic major economy in Europe, and hence the perceived loss to European productivity and growth prospects of Brexit.
• Our global outlook. Why we are different from consensus, and why we feel good about that.
• And, partly related, why we are more worried about the economic effects of the spreading of the coronavirus than many others seem to be.

31 Jan 20: Chart of the Week - Eurozone inflation would be closer to the ECB goal if it included owner-occupied housing

• The definition of price stability will be at the core of the ECB’s policy review that just started. Currently, the ECB defines price stability as “a year-on-year increase in the Harmonized Index of Consumer Prices (HICP) below, but close to, 2% over the medium term”. However, some members of the ECB’s Governing Council (GC) have hinted that HICP may no longer adequately reflect the inflation rate...

23 Jan 20: Chart of the Week - Eurozone: Weakening loan demand suggests investment is slowing

• On Tuesday, the ECB published its Bank Lending Survey (BLS) for 4Q19. The BLS provides valuable and timely information in regard to developments in supply and demand of bank credit in the euro area. Amid broadly stable lending standards, headlines have mainly focused on the first decline in net demand for loans to firms since the end of 2013. At that time, declining loan demand came with a...

19 Jan 20: Chief Economist´s Comment - Sunday Wrap

• EM investors in Vienna predict stronger growth for the CEE region than we do, largely reflecting more positive assumptions about the global business cycle.
• The ECB policy review is about to start: the risk that it might signal higher tolerance for suboptimally low inflation should not be underestimated.
• US-China trade deal: temporary truce, but no breakthrough.

17 Jan 20: Chart of the Week - Why the BoE is set to imminently cut rates

• The Bank of England’s MPC is likely to cut interest rates by 25bp at the end of this month, and it should be an easy decision for them to make. Our Chart of the Week shows that the MPC historically has moved interest rates in tandem with output growth – proxied here by a weighted average of PMIs for services, manufacturing and construction and the CBI distributive trades survey. The intuition is...

13 Jan 20: CEE Quarterly - CEE: An outperformer in testing times (1Q20)

• 2020 could prove a difficult year for EM due to weak global trade, a likely slowdown in the US, tighter financial conditions in EM and the impact these factors might have on policies and macroeconomic imbalances. A recovery is on the cards in 2021.
• CEE could be again an outperformer among EM owing to lower reliance on foreign capital and US demand, as well as better economic policies and the EU...

12 Jan 20: Chief Economist´s Comment - Sunday Wrap

• Income distribution: Expect policies to boost the income of the less-well-offs at the expense of predominantly businesses and capital owners.
• Climate change: Expect that “talk” will finally turn into “action”, with possibly massive ramifications for relative performance of asset classes.
• Gender equality: Expect legislation on quotas – and a more decisive role by the courts.
• Social media: Expect...

13 Feb 20: Rates Perspectives - Governments go green: Facts, figures and upcoming deals

• Investor interest in green bonds is increasing. Healthy demand is mirrored in supply: in 2019, the issuance volume of EUR-denominated green bonds amounted to around EUR 90bn, bringing the outstanding to around EUR 255bn.
• Euro-area sovereigns have started to issue green bonds in recent years but the market is still in its early stages, with four bonds trading and a total size of around EUR 40bn. The...

23 Jan 20: Rates Perspectives - A deep dive into Austria´s government bond market

• A balanced budget is on the agenda of Austria’s new government led by the Conservatives (ÖVP) and the Greens. With Austria’s GDP growth set to exceed the eurozone average, Austrian macroeconomic fundamentals remain among the most solid in the euro area.
• About two thirds of Austrian bond market is held by foreign investors, and in particular by non-banks. 20% is held by domestic investors (half of...

21 Nov 19: UniCredit Macro & Markets - 2020-21 Outlook: Late-cycle blues

• Macro: Global growth is set to weaken further to 2.7% in 2020, as the US economy is likely to enter a downturn, protectionist tensions are unlikely to fade materially and the resilience of the domestic drivers of eurozone growth starts to wane. The Fed will probably cut rates by 100bp, while the ECB is expected to stand pat and focus on its policy review. Economic growth in the CEE region will...

25 Sep 19: The UniCredit Economics Chartbook - Global slowdown under way – and still downside risk (4Q19)

• Dear Reader, welcome to the latest issue of our Economics Chartbook, in which we are fine-tuning some of our growth forecasts to take into account a weaker global economy. Major central banks have been supportive, especially the ECB, but this can only mitigate the downside risks.
• Global: We are revising slightly downward our global GDP growth forecast for this year by 0.1pp to 3.0% while...

10 Dec 19: Shortened version of the Euro Credit Pilot (December 2019)

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

The late stage of the credit cycle will likely be prolonged by the extraordinary ECB policy measures. Performance in European credit is being pulled in one direction by cyclical headwinds (projected in our below-consensus growth forecast and a mild recession in the US),...

10 Dec 19: Chart of the Week - Signs of complacency in equity markets are rising

• Our Chart of the Week shows net-short positions in Chicago Board Options Exchange (CBOE) Volatility Index (VIX) futures along with the three-month performance of the S&P 500 (advanced by three months). The amount of net-short positions in the VIX futures recently rose to its highest level since the launch of this instrument in 2004, according to the latest data from the Commodity Futures Trading...

04 Feb 20: CEE Quarterly - CEE: Ein Outperformer in herausfordernden Zeiten (1Q20)

Übersetzung der englischen Originalversion vom 13. Januar 2020

• Das Jahr 2020 könnte sich aufgrund des schwachen Welthandels, einer wahrscheinlichen Verlangsamung in den USA, der verschärften finanziellen Bedingungen in den Schwellenländern und der Auswirkungen, die diese Faktoren auf die Politik und die makroökonomischen Ungleichgewichte haben könnten, als ein schwieriges Jahr für die...