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Chief Economist's Comment - 19 May 2019    

Sunday Wrap

  • Uncertainty rises as the trade war broadens to the tech sector. Financial conditions should be monitored carefully to gauge where growth is heading.
  • The Fed is firmly in wait-and-see mode, while the ECB faces trade-offs when deciding on the pricing of TLTRO III.
  • The importance of mutual trust for the...
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  • Uncertainty rises as the trade war broadens to the tech sector. Financial conditions should be monitored carefully to gauge where growth is heading.
  • The Fed is firmly in wait-and-see mode, while the ECB faces trade-offs when deciding on the pricing of TLTRO III.
  • The importance of mutual trust for the next leg of eurozone integration.
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Sunday Wrap: Kurzzusammenfassung

Publikation nur auf Englisch verfügbar

  • Die Unsicherheit nimmt zu, da der Handelskrieg auf den Technologiesektor übergreift. Die finanziellen Bedingungen sollten sorgfältig im Auge behalten werden, um zu beurteilen, wo das Wachstum hingeht.
  • Die Fed befindet sich eindeutig in Wartestellung, während die...
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Publikation nur auf Englisch verfügbar

  • Die Unsicherheit nimmt zu, da der Handelskrieg auf den Technologiesektor übergreift. Die finanziellen Bedingungen sollten sorgfältig im Auge behalten werden, um zu beurteilen, wo das Wachstum hingeht.
  • Die Fed befindet sich eindeutig in Wartestellung, während die EZB bei der Preissetzung für das TLTRO III verschiedene Faktoren abwägen muss.
  • Die Bedeutung des wechselseitigen Vertrauens für die nächste Phase der Integration im Euroraum.
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Sunday Wrap: Breve riassunto

Pubblicazione disponibile solo in inglese

  • Cresce l’incertezza mentre la guerra commerciale si allarga al settore tecnologico. Le condizioni finanziarie devono essere monitorate con attenzione per valutare in che direzione si dirige la crescita.
  • La Fed si mantiene fermamente in posizione “wait and...
more >>>

Pubblicazione disponibile solo in inglese

  • Cresce l’incertezza mentre la guerra commerciale si allarga al settore tecnologico. Le condizioni finanziarie devono essere monitorate con attenzione per valutare in che direzione si dirige la crescita.
  • La Fed si mantiene fermamente in posizione “wait and see”, mentre la BCE dovrà fare delle scelte nel decidere i prezzi di TLTRO III.
  • L’importanza della fiducia reciproca per la prossima fase dell’integrazione europea
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- 15 Nov 2018  

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...
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  • 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 3.25-3.50% range in mid-2019 before falling back to 2.75% by year end, with the curve inverting. Pressure on core EGBs is likely to be limited. We expect BTP spreads to widen to 350-375bp in 1H19 due to high supply and political uncertainty, before easing back to 275bp later in the year.
  • FX: EUR-USD is likely to slip to 1.08 by mid-2019, reflecting the risk picture and the US-eurozone growth differential. A reversal back to 1.20 seems likely in 2020 as the Fed starts cutting rates. Sterling has room to rebound once Brexit-related uncertainty recedes. The JPY and the CHF will likely rise over a two-year horizon.
  • Equities: We expect 2019 to be a volatile – and mostly unattractive – year for equities. Our 2019 year-end index target for the Euro STOXX 50 is 3300, for the DAX 12000 and for the FTSE MIB 19800. 2019 will be dominated by a slowdown in earnings growth globally. We still consider consensus estimates to be too optimistic.
  • Credit: Investors should prepare for considerable spread widening in 2019 as there will be a slowdown in earnings alongside an economic deceleration. Credit fundamentals of European corporates are in better shape than those of US peers and a decline in issuance activity will partly offset the substantially reduced demand from the CSPP.
  • CEEMEA: EMFX should continue to perform poorly in trade-weighted terms given the deteriorating trend in global trade volumes, but EMFX-USD could get a lift along with EUR-USD in 2H19. EM credit will likely face pressure in 1H19 but some relief should be seen in 2H19 as the dollar eases and US yields come down.
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2019-20 Outlook: Abschwung in Sicht – defensive Anlagen bevorzugt

  • Macro: Das Wachstum der Weltwirtschaft dürfte sich 2019 weiter auf 3,4% abschwächen. 2020 sollte die USA in eine Rezession abgleiten und die globale Konjunktur dürfte sich noch stärker abkühlen. Die US-Notenbank Fed wird ihre Zinsen vermutlich im 1. Halbjahr 2019 weiter anheben, um 2020 ihre...
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  • Macro: Das Wachstum der Weltwirtschaft dürfte sich 2019 weiter auf 3,4% abschwächen. 2020 sollte die USA in eine Rezession abgleiten und die globale Konjunktur dürfte sich noch stärker abkühlen. Die US-Notenbank Fed wird ihre Zinsen vermutlich im 1. Halbjahr 2019 weiter anheben, um 2020 ihre Geldpolitik mit drei Zinssenkungen wieder zu lockern. Der EZB dürfte unterdessen gerade genug Zeit bleiben, um die Negativzinsen im 1. Quartal 2020 zu beenden, bevor sich das Wachstum in der Eurozone deutlich verlangsamt.
  • Staatsanleihen: Wir erwarten, dass die Renditen der 10-jährigen US-Treasuries Mitte 2019 bei 3,25% bis 3,5% ihren Höhepunkt erreichen. Bis zum Jahresende 2019 dürfte sich die Kurve invertieren und die Renditen sollten auf 2,75% zurückfallen. Der Druck auf europäische Staatsanleihen wird vermutlich begrenzt ausfallen. Wir rechnen im 1. Halbjahr 2019 aufgrund des hohen Angebots und der politischen Unsicherheiten mit einer Ausweitung der Renditeaufschläge für italienische Staatsanleihen auf 350 Basispunkte (Bp.) bis 375 Bp. Im weiteren Jahresverlauf sollten sie dann nachgeben auf 275 Bp.
  • Devisen: EUR-USD dürfte bis Mitte 2019 auf 1,08 fallen, wofür die Risikolage und die Wachstumsdifferenz zwischen den USA und der Eurozone verantwortlich sind. 2020 wird sich der Kurs vermutlich auf 1,20 erholen, wenn die Fed ihren Lockerungszyklus aufnimmt. Das Pfund Sterling könnte zulegen, sobald die Unsicherheiten im Zusammenhang mit dem Brexit nachlassen. Der japanische Yen und der Schweizer Franken werden über einen Zeitraum von zwei Jahren wohl zulegen.
  • Aktien: Wir rechnen damit, dass die Aktienmärkte 2019 von Volatilität geprägt und überwiegend unattraktiv sein werden. Unser Jahresendziel 2019 für den Euro STOXX 50 liegt bei 3.300, für den DAX erwarten wir 12.000 Zähler und der FTSE MIB sollte 19.800 Punkte erreichen. Das Jahr 2019 wird weltweit von einer Abschwächung des Gewinnwachstums dominiert werden. Wir schätzen die Konsenserwartungen immer noch als allzu optimistisch ein.
  • Unternehmensanleihen: Anleger sollten sich 2019 auf eine deutliche Ausweitung der Risikoaufschläge vorbereiten. Hierfür werden das langsamere Gewinnwachstum sowie die Abkühlung der Konjunktur ausschlaggebend sein. Die Fundamentaldaten europäischer Unternehmensanleihen befinden sich in einer besseren Verfassung als diejenigen ihrer US-Pendants. Ein Rückgang der Emissionsaktivitäten wird den erheblichen Rückgang der Nachfrage seitens des CSPP vermutlich teilweise aufwiegen.
  • CEEMEA: Da der Welthandel abflaut, dürften die handelsgewichteten Devisen der Schwellenländer auch künftig eine schwache Performance erzielen. Im 2. Halbjahr 2019 sollten die Schwellenländerwährungen im Vergleich zum US-Dollar gemeinsam mit EUR-USD Auftrieb bekommen. Unternehmensanleihen aus Schwellenländern werden im 1. Halbjahr 2019 vermutlich unter Druck geraten. Im 2. Halbjahr könnte indes eine gewisse Entlastung bevorstehen, wenn der Greenback und die US-Renditen nachgeben.
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The Unicredit Economics Chartbook - 26 Mar 2019

Major central banks turn cautious (2Q19)

  • Global: We reduce our estimate for global growth this year to 3.2% (previously 3.4%) while maintaining our forecast for 2.7% growth in 2020. The downward revision reflects significantly reduced momentum around the turn of the year, which has persisted, particularly in global trade. The current...
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  • Global: We reduce our estimate for global growth this year to 3.2% (previously 3.4%) while maintaining our forecast for 2.7% growth in 2020. The downward revision reflects significantly reduced momentum around the turn of the year, which has persisted, particularly in global trade. The current weakness is likely driven by policy uncertainty, notably US trade tensions and Brexit-related uncertainty, as well as a sharp tightening of financial conditions at the end of last year. We expect a modest recovery in global trade in 2H19, thanks to some resolution of trade policy uncertainty and the easing of financial conditions as major central banks have taken a more cautious approach. In 2020, we continue to expect a renewed cyclical slowdown, driven mainly by the US.
  • US: Growth momentum peaked last year, when the US economy expanded a solid 2.9%. Following a string of disappointing data over the last few months, we lower our growth forecast for this year to 2.2% from 2.4%. The slowdown in the quarterly path will be even more pronounced, as we continue to expect GDP growth to slow below 1.5% in 2H19 and even further in 2020, when we forecast the economy will fall into a mild recession. While the labor market has continued to tighten, inflation rates have remained muted. This, in combination with growing concern about the economic outlook and financial market developments, means that the Fed is unlikely to raise rates again this year. For next year, we expect a series of rate cuts in response to the weakening economy.
  • EMU: We lower our growth forecast for this year to 1.0% from 1.4%, while leaving the projection for 2020 broadly unchanged at 1.0% (from 1.1%). The main culprit is the severe deterioration in global trade at the turn of the year. The trough of the growth slowdown for 2019 is likely to be recorded in the first quarter. On 7 March, the ECB announced a package of policies designed to preserve very accommodative financial conditions. We stick to our forecast for unchanged policy rates throughout 2020. European Parliament elections will take place on 23-26 May. An alliance between the European People’s Party and the Socialists and Democrats would likely fall short of an absolute majority, implying that coalition talks will have to involve the liberals and/or the Greens. The heterogeneous nature of populist parties is likely to constrain their influence on EU political debate.
  • CEE: We expect GDP growth to slow in CEE countries belonging to the EU (EU-CEE) to 3.2% in 2019 and 2.5% in 2020. Weak global trade, lower growth in the eurozone, a cyclical slowdown in domestic demand, and limited scope for monetary and fiscal stimulus are the main reasons growth may fall below potential by next year. Turkey could come out of recession later this year if it asks for financial support, and grow below potential in 2020. In Russia, growth may fall close to potential in 2019-20, estimated at around 1%, unless the authorities shift to policies conducive to growth. After peaking in 2019, inflation is likely to fall throughout CEE, allowing central banks in EU-CEE to remain on hold, while the CBR and the CBRT are expected to cut rates.
  • UK: We revise down slightly our forecast for GDP growth this year to 1.2% (previously 1.4%) reflecting an intensification and prolongation of Brexit-related uncertainty as well as softer external demand. We expect the UK to exit the EU with a deal, but the timing is extremely uncertain and the risk of a general election is high. The BoE will probably remain on hold throughout 2019.
  • China: Our GDP growth forecasts of 6.2% in 2019 and 5.9% in 2020 remain on track. After a difficult 2H18 and a challenging start to 2019, Beijing is in the process of loosening fiscal and monetary policy, while pushing for the construction of new infrastructure across the country. The rise in aggregate credit in the first two months of the year follows on from a tightening trend that has been in place since 3Q17. Given leads and lags with activity, if credit growth continues to improve, GDP growth could stabilize somewhat in 2H19.
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CEE Quarterly - 26 Mar 2019  

Bracing for external headwinds (2Q19)

  • The cyclical slowdown has started in CEE, with growth expected to slow from 2.5% in 2018 to 1.7% in 2019 and 1.4% in 2020 in CEE excluding Turkey.
  • EU-CEE is likely to grow by 3.2% in 2019, with growth falling to 2.5% and below potential in 2020.
  • Turkey could exit recession later this year if it asks...
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  • The cyclical slowdown has started in CEE, with growth expected to slow from 2.5% in 2018 to 1.7% in 2019 and 1.4% in 2020 in CEE excluding Turkey.
  • EU-CEE is likely to grow by 3.2% in 2019, with growth falling to 2.5% and below potential in 2020.
  • Turkey could exit recession later this year if it asks for financial support, growing below potential in 2020. In Russia, growth could fall close to potential, estimated at around 1%.
  • A temporary recovery in global growth in 2Q19 and 3Q19 could be followed by a cyclical downturn in 2020.
  • CEE’s resilience to external shocks will depend on three main factors: the strength of domestic demand, the scope for monetary or fiscal stimuli, and the dependency on foreign capital inflows.
  • The scope for fiscal stimulus is limited to Bulgaria and Czechia. All other countries may have to cope with adverse market reactions as structural deficits are widening.
  • Central banks are likely to remain on hold in EU-CEE, looking through 2019’s inflation peaks. A dovish ECB, disinflationary external shocks and foreign capital inflows will support rates on hold in central Europe.
  • We expect both the CBR and the CBRT to re-start cutting rates in 2H19. The scope for cuts will depend on external shocks and on whether Turkish authorities ask for foreign financial support.
  • EU-CEE bonds remain attractive as a pickup over Bunds (POLGBs, long-end CZGBs) or FX-hedged (HGBs). OFZ look attractive despite sanction risks.
  • Net issuance on external markets will be positive only in Romania and Turkey.
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Einstellen auf externe Gegenwinde (2Q19)

  • Die konjunkturelle Verlangsamung hat in CEE begonnen, wobei erwartet wird, dass sich das Wachstum von 2,5% im Jahr 2018 auf 1,7% im Jahr 2019 und 1,4% im Jahr 2020 in CEE ohne Türkei verlangsamt.
  • Die EU-CEE-Region wird 2019 voraussichtlich um 3,2 % wachsen, wobei das Wachstum auf 2,5 % und 2020 unter...
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  • Die konjunkturelle Verlangsamung hat in CEE begonnen, wobei erwartet wird, dass sich das Wachstum von 2,5% im Jahr 2018 auf 1,7% im Jahr 2019 und 1,4% im Jahr 2020 in CEE ohne Türkei verlangsamt.
  • Die EU-CEE-Region wird 2019 voraussichtlich um 3,2 % wachsen, wobei das Wachstum auf 2,5 % und 2020 unter das Potenzial fällt.
  • Die Türkei könnte die Rezession noch in diesem Jahr überwinden, wenn sie finanzielle Unterstützung beantragt und 2020 unter dem Potenzial wächst. In Russland könnte das Wachstum nahezu dem Potenzial entsprechen und wir schätzen es auf rund 1%.
  • Einer vorübergehenden Erholung des globalen Wachstums im zweiten und dritten Quartal könnte ein zyklischer Abschwung im Jahr 2020 folgen.
  • Die Widerstandsfähigkeit der CEE Staaten gegen externe Schocks wird von drei Hauptfaktoren abhängen: der Stärke der Inlandsnachfrage, dem Spielraum für monetäre oder fiskalische Impulse und der Abhängigkeit von ausländischen Kapitalzuflüssen.
  • Die Möglichkeiten für fiskalische Anreize sind auf Bulgarien und Tschechien beschränkt. Alle anderen Länder müssen möglicherweise mit negativen Marktreaktionen fertig werden, da sich die strukturellen Defizite ausweiten.
  • Die Zentralbanken dürften in der EU-CEE weiterhin abwartend sein und die Inflationsspitzen des Jahres 2019 durchschauen. Eine moderate EZB, disinflationäre externe Schocks und ausländische Kapitalzuflüsse werden die in Mitteleuropa stabilen Zinsen stützen.
  • Wir gehen davon aus, dass sowohl die CBR als auch die CBRT im 2H19 Zinssenkungen wieder aufnehmen werden. Der Umfang der Kürzungen wird von externen Schocks und davon abhängen, ob die türkischen Behörden ausländische finanzielle Unterstützung beantragen.
  • EU-CEE-Anleihen bleiben attraktiv bei Erholung gegenüber Bundesanleihen (POLGBs, langlaufende CZGBs) oder FX-Hedges (HGBs). OFZ sieht trotz Sanktionsrisiken attraktiv aus.
  • Nur in Rumänien und der Türkei werden die Nettoemissionen auf den externen Märkten positiv sein.
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Rates Perspectives - 08 May 2019

Flows of eurozone investors into USTs: another factor keeping UST real yields low

  • The ECB’s asset purchase program has triggered an increase in outflows of eurozone investors to debt securities of other countries, USTs in particular.
  • While outflows have slowed down in the last few months, so far there has been no evidence of a reversal. This is the case despite the fact that the...
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  • The ECB’s asset purchase program has triggered an increase in outflows of eurozone investors to debt securities of other countries, USTs in particular.
  • While outflows have slowed down in the last few months, so far there has been no evidence of a reversal. This is the case despite the fact that the advantage for a EUR-based investor to invest in USTs has been eroding for some time.
  • We share the view of the ECB’s Benoît Cœuré that the scarcity of safe assets denominated in EUR, which was further exacerbated by the ECB’s quantitative easing (QE), may be behind the flows. We therefore think that we will not see a reversal of outflows of eurozone investors into USTs in the near term.
  • We show that scarcity of safe assets denominated in EUR does, indeed, have an impact on UST real yields. If, as we expect, eurozone investors’ flows to USTs will continue, as scarcity of safe asset denominated in EUR will most probably persist, this will likely be another factor keeping UST real yields low in the coming months.
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FX Perspectives - 09 May 2019

The BoJ was right and farsighted – monetary-policy prospects in Japan and implications for the JPY

  • The BoJ has been criticized for keeping monetary policy extra loose while other central banks began, or were close to starting, the process of normalizing interest rates.
  • Yet, some G10 central banks have taken a break from hiking rates or have started discussing a return to easing. The BoJ, as the...
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  • The BoJ has been criticized for keeping monetary policy extra loose while other central banks began, or were close to starting, the process of normalizing interest rates.
  • Yet, some G10 central banks have taken a break from hiking rates or have started discussing a return to easing. The BoJ, as the last holdout in this regard, now appears farsighted in its strategy. In addition, the BoJ revised its forward guidance in April, signaling that it would remain on hold with regard to raising rates until spring 2020.
  • However, the Japanese economy is lagging, and the sales-tax rate hike from 8% to 10% in October could revive the debate about more easing to limit the drag of tighter fiscal policy on growth.
  • That there are no prospects of an exit strategy and few chances, if any, that monetary policy at home will be able to be eased further are a blow to the JPY outlook. Still, the impact of this may be felt more in terms of a lower margin of appreciation than in terms of a well-established, new bearish trend.
  • The USD is set to weaken, as the US economy slows, while global uncertainty may still spark new waves of risk aversion across markets and stock-flow repatriation to Japan. In our view, risks for USD-JPY are still tilted to the downside for both the rest of 2019 and 2020.
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