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...

09 Jan 20: Chart of the Week - How high can US-Iran tensions push oil prices?

• How high can oil prices go in the wake of the Iranian crisis? Although both parties now seem willing to back down from a further military escalation, the crisis is probably not over yet. Our Chart of the Week is a flowchart depicting our view on where oil prices could end up in the short-term, depending on whether or not oil production is disrupted and on how long the shock lasts.
• The first thing...

08 Jan 20: Economics Thinking - Spain vs. Italy: Dissecting the “structural” growth outperformance

• Spain's new government looks too fragile to push for significant measures to boost the economy and will have to rely on the dividend of the post-crisis adjustment – due partly to the rebalancing of the economy, and partly to the structural reforms adopted since the 2010s.
• In this note, we focus on whether the reform efforts have managed to significantly improve the structure of the Spanish economy....

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

• The upcoming US election could lead Trump seriously astray in foreign policy matters (me – Erik)
• The US might impose sanctions on Chinese companies (Stefan Kolek)
• Brexit could lead to a break-up of the UK (Daniel Vernazza)
• ECB announces that rates are below the reversal rate and hikes (Marco Valli)
• Eurozone inflation (or inflation expectations) drop, and the ECB does nothing, thereby losing...

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...

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

• Key features of ESM reform
• Why the political debate in Italy misses the point
• What I regard as the real trade-off implied by the reform

04 Dec 19: Chart of the Week - Past inflation misses are not “bygones” to US households

• Our Chart of the Week shows that, in the US, the trend decline in household long-term inflation expectations has been closely associated with cumulative past inflation “misses” of actual PCE inflation relative to the Fed’s 2% target.* There is real concern that the current inflation-targeting regime – employed by central banks all over the world – where past inflation misses are treated as...

01 Dec 19: Chief Economist´s Comment - Sunday Wrap

• I’ll discuss two concrete examples (within just weeks of each other) of the destructive power of Trump’s approach to multilateralism, and of China’s ambitions to become the new global leader – and I’ll suggest what should be Europe’s response.
• I’ll return to my long-held obsession with investment, today leaving aside the issue of public sector investment, but rather use the just released 2019...

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...

09 Jan 20: Rates Perspectives - Italy’s 2020 funding outlook and how to trade it

• In 2020, we expect Italy to issue EUR 240-245bn of domestic government bonds, with supply pressure basically unchanged compared to 2019.
• In terms of distribution of supply, there should be a moderate re-balancing from the 5Y to the 3Y tenor. Net supply of CTZs will go from positive in 2019 to neutral/moderately negative in 2020. Supply pressure will be high for BTPeis (as there will be no...

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...

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...