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23 August 2018 No Help for Eurozone Equities from Macro-Liquidity Indicators (Publication Centre)

The story in EZ capital markets this year has been downbeat.

10 June. 2015 ECB policies are partly to blame for low bond market liquidity (Publication Centre)

The last few weeks' action in Eurozone financial markets has shown investors that the QE trade is not a one-way street. Higher short-rates could force the ECB to take preventive measures, but we don't think the central bank will be worried about rising long rates unless they shoot much higher.

7 February 2018 Global Liquidity has been Damaged Recently, but 2008 this is not (Publication Centre)

In terms of one-day moves, the drop in U.S. equities yesterday and Asian equities in the past two days has been pretty bad.

7 July 2017 China's Authorities Losing the Regulatory Arbitrage Game (Publication Centre)

All regulators face the challenge that when you regulate one part of the economy, problems appear somewhere else. For China, the game is particularly intense because liquidity created by previous debt binges continues to slosh around the financial system, with no outlet to the real economy.

17 August 2017 China's Reform Scorecard Part Five: Monetary Policy Operation (Publication Centre)

Chinese monetary policymakers can rely on several different instruments to affect market and broad liquidity, ranging from various forms of open market operations to interest rates to FX intervention. The tool kit is constantly changing as the PBoC refines its operations.

28 January 2019 PBoC CBSs: Not Quite QE, but Potentially a Useful Step (Publication Centre)

Last week the Chinese authorities issued a series of new measures to help with bank recapitalisation, and, we think, to supplement interbank liquidity.

24 Nov. 2015 Will Gilts Decouple as US Treasury Yields Rise? (Publication Centre)

A less rapid tightening of monetary policy in the U.K. than in the U.S. should ensure that gilt yields don't move in lockstep with U.S. Treasury yields over the coming years. But the outlook for monetary policy isn't the only influence on gilt yields. We expect low levels of market liquidity in the secondary market, high levels of gilt issuance and overseas concerns about the possibility of the U.K.'s exit from the E.U. to add to the upward pressure on gilt yields.

24 March 2017 TLTROs Finish with a Bang, but it Probably does not Mean Much (Publication Centre)

Robust demand in the ECB's final TLTRO auction was the main story in EZ financial markets yesterday. Euro area banks--474 in total-- took up €233.5B in the March TLTRO, well above the consensus forecast €110B. To us, this strong demand is a sign that EZ banks are taking advantage of the TLTROs' incredibly generous conditions.

24 October 2018 Korea's Stronger Q3 Growth Likely due to Falling Imports, Ominously (Publication Centre)

Korea's preliminary GDP report for Q3 will be released tomorrow.

26 November 2018 The Coming Year won't Provide Much Respite for Asian Economies (Publication Centre)

The past year has been difficult for Asian economies, with trade wars, natural disasters, and misguided policies, to name a few, putting a dampener on growth.

26 June 2018 RRR Cut is More Evidence the PBoC Switching to an Easing Bias (Publication Centre)

The PBoC cut the reserve requirement ratio by 0.5pp for almost all banks on Sunday, effective from July 5th.

26 Feb. 2015 GDP growth will pick up in the Eurozone this year (Publication Centre)

Hard economic data for the first quarter will appear over the next few weeks, but the EC sentiment survey later today gives a useful overview of how the euro area economy started the year.

25 September 2017 China Downgraded but Risk of a Default is Slim, China is a Saver (Publication Centre)

S&P downgraded Chinese government debt last week to A+ from AA- yesterday, following a Moody's downgrade last May.

24 July 2017 Not Much Upside for Eurozone Equities in the Rest of 2017 (Publication Centre)

The tailwinds that have propelled Eurozone equities higher since the middle of last year remain place, in principle. In the economy, political uncertainty in the euro area has turned into an opportunity for further integration and reforms, and cyclical momentum in has picked up. And closer to the ground, fundamentals also have improved.

24 January 2018 Government Bonds Can Cope With an End to QE. Can C orporates? (Publication Centre)

Bond markets didn't panic when the ECB announced its intention further to reduce the pace of QE this year, to €30B per month from €60B in 2017.

21 August 2017 Construction is Propelling the Eurozone Economy in 2017 (Publication Centre)

The construction sector remains a stand-out performer in the Eurozone economy, despite stumbling at the end of Q2.

20 November 2017 PBoC Lets up After Tightening Ahead of Fed Hikes (Publication Centre)

The PBoC has let up on its open-market operations after allowing bond yields to move higher again in October.

20 June 2018 Japan's Banks have Taken Over from European Banks Post-GFC (Publication Centre)

We repeatedly have highlighted Japanese banks' foreign activities as source of rising risk for Japan and the global financial system.

20 June 2017 China Property is Slowing, Prices now Depend on Mortgage Rates (Publication Centre)

House price inflation in tier-one cities has been crushed by China's most recent monetary tightening. This is a sharp turnaround from the overheating mid-way through last year. Unlike in previous cycles, interest rates are probably more important for house prices than broad money growth.

21 March 2018 Fiscal stimulus in the EZ won't cure global imbalances (Publication Centre)

Global current account imbalances are back on the agenda. In the U.S., economic policies threaten to blow out the twin deficit, while external surpluses in the euro area and Asia are rising.

21 March 2019 Upside Risks to our China 2019 GDP Growth Forecast (Publication Centre)

For countries with developed non-banking funding channels, narrow money isn't necessarily a good predictor of GDP growth.

27 June 2017 The Italian Job on Two Small Venetian Banks is a Good Start (Publication Centre)

The strengthening recovery in the euro area is proving to be a poisoned chalice for some of the region's most vulnerable banks. Earlier this month-- see our Monitor of June 8--Spain's Banco Populare was acquired by Banco Santander, and the bank's equity and junior credit holders were bailed-in as part of the deal.

23 June 2017 PBoC is to the Chinese Yield Curve as Dr Frankenstein is to the Monster (Publication Centre)

China has undoubtedly been through a credit tightening, commonly explained as the PBoC attempting to engineer a squeeze, to spur on corporate deleveraging.

22 January 2018 Is the EZ's Current Account Surplus Pulling the Euro Up? (Publication Centre)

The data tell an increasingly convincing story that the Eurozone's external surplus rose further in the second half of last year.

24 January 2019 Mr. Draghi Won't Help Already Dovishly-Inclined Markets Today (Publication Centre)

The ECB will deliver a carbon copy of its December meeting today, at least in terms of the main headlines.

28 February 2019 A Dovish Money Supply Report Ahead of the March ECB Meeting (Publication Centre)

Yesterday's January EZ money supply data offered support for investors betting on a further dovish shift by the ECB at next month's meeting.

4 May 2018 Is China Leaking Financial Fragility, a Financial Crisis in the Making? (Publication Centre)

We've argued for some time that China faces a massive legacy of bad debt that will either have to be dealt with, or will result in the Japanning of its economy.

31 May 2019 Q&A on the Government Takeover of Baoshang Bank (Publication Centre)

Was this an isolated occurrence, connected to the graft investigation into Chinese billionaire Xiao Jianhua, and his financial conglomerate?

30 October 2018 Are Chinese Pro ts Normalising But the Headwinds Remain (Publication Centre)

Chinese headline industrial profits data show that growth slowed to just 4.1% year-over-year in September, from 9.2% in August.

5 June 2019 India's Q1 GDP was a Big Miss, but a Knee Jerk Cut Would be Foolish (Publication Centre)

GDP growth in India slowed sharply in the first quarter of the year, as expected--see here--opening the door for the RBI to cut interest rates further at its policy announcement tomorrow.

5 September 2017 How Much of a Headwind is a Stronger Euro for EZ Equities? (Publication Centre)

At the start of the year, consensus forecasts expected Eurozone equities to outperform their global peers this year, on the back of a strengthening cyclical recovery and an increase in earnings growth. Both of these conditions have been met, and yesterday's sentiment data suggest that EZ equity investors remain constructive.

9 October 2018 PBoC RRR cut: The Lady Doth Protest too Much, Methinks (Publication Centre)

Over the weekend, the PBoC cut the RRR for the vast majority of banks. FX reserves data released shortly after suggested that the Bank already is propping up the currency.

8 September 2017 China Probably is Content with its Modest "Safe-haven" Role, for now (Publication Centre)

Geopolitical tensions have risen sharply for Asia in the last few months, yet the RMB has appreciated sharply. China's currency appears to be playing some kind of safe haven role.

7 September 2018 Are Chinese Efforts to Stabilise Growth Starving Private Firms (Publication Centre)

China's authorities recognised, around the middle of this year, that activity was slowing and that monetary conditions had become overly tight.

3 June 2019 China's Faltering "Recovery" will Keep its Trade Negotiators Engaged (Publication Centre)

The sharp fall in China's manufacturing PMI in May makes clear that its recovery is nowhere near secured.

29 September 2017 China's Pending Targeted RRR cut Implies SMEs are Struggling (Publication Centre)

China is set to ease reserve requirements for banks lending to small businesses. In a statement after the State Council meeting yesterday, Premier Li Keqiang said that commercial banks would receive a cut in their RRR , from 17% currently, based on how much they lend to businesses run by individuals.

28 Apr. 2015 Too Far, Too Fast For Eurozone Equity Markets since October? (Publication Centre)

QE and a gradually strengthening economy will remain positive catalysts for equities in the euro area this year. But with the MSCI EU ex -UK up almost 24% in the first quarter, the best quarterly performance since Q4 1999, the question is whether the good news has already been priced in.

27 September 2018 What to Expect From Today's 2019 Budget Headlines in Italy (Publication Centre)

Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.

27 October 2017 The ECB Announces Reduced QE Next Year, and Markets Like It (Publication Centre)

The ECB broadly conformed to markets' expectations today. The central bank maintained its key refinancing and deposit rates at 0.00% and -0.4% respectively, and delivered the consensus package on QE.

19 September 2017 China's Property Market Cools, Downtrend now Established (Publication Centre)

China's property market continued to slow in August, with prices rising by just 0.2% month-on- month seasonally adjusted, half the July pace.

28 November 2017 The EZ Economy Won't Tell us What Happens Next in Equities (Publication Centre)

This year has been a story of two halves for EZ equities. The MSCI EU ex-UK jumped 11% in the first five months of 2017, but has since struggled to push higher.

29 November 2018 The Jump in EZ Money Growth is Deceptive M1 was Unchanged (Publication Centre)

Money supply growth in the Eurozone quickened last month, by 0.3 percentage points to 3.9% year- over-year, but the details were less upbeat.

28 September 2018 Fed Hikes, PBoC Holds What Interest Rate Differential (Publication Centre)

The PBoC doesn't publicly schedule its meetings, but in recent years has tended to make moves after Fed decisions.

27 June 2018 China Turns to the RRR to Sustain the Debt Clean-up Amid Fed Hikes (Publication Centre)

In yesterday's Monitor, we laid out the prime causes of China's weekend announcement, cutting the reserve requirement ratio.

18 October 2018 China's Monetary Transmission Mechanism Working...with Wrinkles (Publication Centre)

China's monetary and credit data--released yesterday, two days behind schedule--suggest that monetary conditions are loosening at the margin, while credit conditions have remained stable, but easier than in the first half.

13 February 2019 Japan's Q4 Bounce Is Secure, but Q1 and Beyond Look Fragile (Publication Centre)

Japan's tertiary index fell further in December,by 0.3% month-on-month, after the downwardly- revised 0.4% drop in November.

13 February 2018 China's Firms Mindful of Intensified Enforcement of Financial Regulation (Publication Centre)

Chinese monetary conditions remain tight. Systemic tightening through higher interest rates last year is playing a role, but intensified and ever- more public regulatory enforcement is becoming the primary driver of tightening credit conditions for businesses.

13 March 2018 Scandals Could Take Down Abe Would Abenomics Survive (Publication Centre)

Japan's Ministry of Finance yesterday admitted falsifying documents submitted to the country's parliament during a corruption probe last year.

14 June 2017 Korean Growth Probably Peaked in Q1. Construction to Slow (Publication Centre)

Construction accounted for the entire 1.1% quarter-to- quarter expansion of the Korean economy in Q1, but the sector is now set to slow.

14 March 2018 What does China's Party - State Restructuring mean? (Publication Centre)

The National People's Congress yesterday announced a sweeping restructuring of Party/State architecture.

19 June 2019 Mr. Draghi Just Made Things Difficult for the BoJ (Publication Centre)

In light of Mr. Draghi's Sintra speech, we take this opportunity to give an update on the BoJ's stance, ahead of the meeting on Thursday.

11 October 2018 Armageddon on Hold China Still Passes the Debt Stress Tests (Publication Centre)

We have recently looked at China's capacity to grow its way out of the debt overhang--see here--and whether last year's deleveraging can be sustained; see here.

03 Mar. 2016 A Lower EZ Inflation Target Makes Sense, but Don't Hold Your Breath (Publication Centre)

Distinguishing between the structural and cyclical story is crucial to understanding the inflation picture in the Eurozone. Nobel laureate Paul Krugman recently lamented--New York Times, March 1st--that the Eurozone economy appears to be stalling. We doubt the outlook for GDP growth this year is that dire.

03 October. 2016 Deutsche's Woes Persist but it's not a European Lehman Moment (Publication Centre)

The European financial sector was in the news again on Friday, propelled by further weakness in Deutsche Bank's share price. In our Monitor of September 27, we said that worries of a European "Lehman Moment" were overblown.

11 Dec. 2014 French Economy Stumbles, as Market Looks Towards 2nd TLTRO (Publication Centre)

An upbeat third quarter for GDP growth in France and slightly better sentiment data have offered at least some hope that the economy could stage a comeback into year-end. But yesterday's disappointing industrial production data poured cold water on that idea.

11 February 2019 Is the Accelerating Fall in Bank Reserves a Real Problem for the Fed? (Publication Centre)

The rundown of the Fed's balance sheet has proceeded in line with the plans laid out b ack in June 2017.

15 January 2018 Chinese Import Growth Slowdown Paints an Overly Gloomy Picture (Publication Centre)

China's import growth in dollar terms slowed sharply to 4.5% year-over-year in December from 17.7% in November, significantly below the consensus forecast.

12 December 2018 China's Monetary Conditions are Still Tightening (Publication Centre)

China's M2 growth stabilised in November, at 8.0% year-over-year, matching the October rate.

18 April 2018 Don't be Lulled by China's Steady Year-over-Year Growth Rate (Publication Centre)

We can't afford the luxury of believing China's year-over-year growth rates. Real GDP growth was 6.8% year-over-year in Q1, matching the rate in Q4 and Q3, and hitting consensus.

18 January 2019 India will Shrug Off the INR Shock, but the Ghost of 2016 is Hovering (Publication Centre)

Data over the past week give a near-complete picture of how India's economy fared in the fourth quarter.

18 October. 2016 Is Portugal on the Brink of a Debt Downgrade and a New Bailout? (Publication Centre)

The Portuguese economy has faltered recently. In the year to Q2, real GDP rose only 0.8%, down from a 1.5% increase in the preceding year. Slowing growth in investment has been the key driver, but consumers' spending has weakened too.

15 June 2017 China's Q2 Growth to Remain Sturdy but Expect a Slower H2 (Publication Centre)

China's industrial production grew at an annualised 7.2% rate by volume in Q1, according to our estimates, up from an average 5.9% rate in the six quar ters through mid-2016.

17 October 2018 The Eurozone's Trade Surplus is Headed Down a Notch this Year (Publication Centre)

The Eurozone's trade surplus rebounded slightly over the summer, rising to €16.6B in August from €12.6B in July, helped mainly by a 2.0% month-to- month jump in exports.

18 January 2018 China's Regulation Juggernaut Rolls into 2018. Enforcement Intensifies? (Publication Centre)

At the end of last year, after October's Party Congress, the Chinese authorities came out with significant new directives and regulations on an almost weekly basis.

17 July 2017 ASF Strength Implies Spiralling Financial Risk, not Strong GDP (Publication Centre)

China's money data, out last week, bode ill for real GDP growth in the second half. June M2 growth dipped to 9.4% year-over-year from 9.6% in May and 10.5% in April.

15 October 2018 It's not Fun to Own EZ Equities this Year, but the ECB won't Blink (Publication Centre)

A bad year is threatening to become a catastrophic one for Eurozone equity investors.

16 August 2018 China's Phoenix Property Market Heats... Will it Help GDP Growth (Publication Centre)

It has been clear for some months now that China's housing market is refusing to quit, and July's data showed the phoenix rising strongly from the ashes.

16 August 2017 As Good as it Gets for German GDP Growth in 2017? (Publication Centre)

Yesterday's Q2 GDP report in Germany was solid, but the headline disappointed slightly. GDP growth slowed to 0.6% quarter-on-quarter from an upwardly- revised 0.7% rise in Q1. The year-over-year rate, however, rose to 2.1% from a revised 2.0% in Q1.

17 April 2019 Households are Primed for a Housing Upturn, but not Developers (Publication Centre)

China's property market looks to be turning the corner, going by the stronger-than-expected March report.

20 November 2018 The Eurozone Economy's Global Liquidity Pump is Sputtering (Publication Centre)

The EZ's current account surplus was stung at the end of Q3, falling to a three-year low of €16.9B in September, from a revised €23.9B in August.

16 July. 2015 The ECB Will be Put on the Spot for Its Role in the Greek Chaos (Publication Centre)

The ECB will keep its main interest rates and the pace of QE purchases unchanged today. Mr. Draghi will also reiterate the commitment to continuing QE until September next year, at least. But the press conference likely will focus on Greece, and the central bank's role in the chaos. Greek financial institutions are on the verge of collapse, partly because the ECB has been forced to cap emergency liquidity assistance--ELA--at €89B, and raise collateral haircut requirements following the announcement of the referendum.

17 July. 2015 A Dovish Mr. Draghi Assures Markets the ECB is Here to Help (Publication Centre)

Yesterday's ECB press conference confirmed our view that Mr. Draghi is the periphery's friend, not enemy. Crucially, the central bank agreed to increase emergency liquidity assistance--ELA--to Greek banks by €900M. This is consistent tent with the agreement by the Eurogroup to give Greece €7B bridge financing, and shows the ECB is ready to act on the back of only a temporary truce between Greece and the EU. The increase in ELA is modest, and we doubt a painful restructuring of the banking system can be avoided. But with Greek bond yields falling, the available pool of collateral will go up, allowing the central bank to provide further relief in coming weeks.

13 June. Does the Flattening Yield Curve Signal Recession? (Publication Centre)

The collapse in gilt yields last week--including a drop to a record low at the 10-year maturity--appears to be an ominous sign for the economic outlook. For now, though, the yield curve signals a further easing of GDP growth, rather than a spiral into recession. Low liquidity also means modest changes in demand are generating large movements in yields, undermining gilts' usefulness as a leading indicator.

13 June 2018 Want to Know What is Happening in EZ Equities? Ask the Foreigners (Publication Centre)

It is by now a familiar story that the Eurozone has become a supplier of liquidity to the global economy in the wake of the sovereign debt crisis.

12 January 2017 Eurozone Equities in 2017: Another Year of Dashed Hopes? (Publication Centre)

A strong December didn't change the story of another year of Eurozone equity underperformance in 2016. The total return of the MSCI EU, ex-UK, last year was a paltry 3.5%, compared to 11.6% and 10.6% for the S&P 500 and MSCI EM respectively. In principle, the conditions are in place for a reversal in this sluggish performance are present. Equities in the euro area do best when excess liquidity--defined as M1 growth less GDP growth and inflation--is rising.

27 June. 2016 A Post-Brexit EU is Weakened, But Not Destined for a Collapse (Publication Centre)

The ECB's statement following the panic on Friday was brief and offered few details. The central bank said that it is closely monitoring markets, and that it is ready to provide additional liquidity in both euros and foreign currency, if needed. It also said that it is in close coordination with other central banks.

7 April 2017 What Place will QE have in the Bank's Future Policy Mix? (Publication Centre)

Markets were jolted yesterday by news that the U.S. Fed is mulling ending, or at least slowing, the reinvestment of Treasuries and mortgage-backed securities later this year. Such a move would reduce liquidity in global markets that has underpinned soaring equity prices in recent years.

1 Dec. 2014 Fed Set to Respond As Unemployment Hits Nairu (Publication Centre)

It has become fashionable to argue that the combination of favorable yield differentials and abundant global liquidity, courtesy of the BoJ and the ECB, will keep Treasury yields very low for the foreseeable future; the 10-year could even establish itself below 2%.

28 Jan. 2015 QE will boost equities this year, but valuations will be stretched to the extreme (Publication Centre)

The ECB will receive most of the credit for the recent gain in stock markets, but the main leading indicator for the stock market, excess liquidity, was already turning up late last year. With the MSCI EU ex-UK up 21%, in euro terms, since October, a lot is already priced in, but in the medium term the outlook is upbeat, and we look for further gains this year.

5 Oct. 2015 Bravery will be Rewarded on Eurozone Equities in Q4 (Publication Centre)

Headwinds from global growth fears have weighed on Eurozone equities in recent months, leaving the benchmark MSCI EU ex-UK index with a paltry year-to-date return ex-dividends of 1.7%. We think bravery will be rewarded, though, and see strong performance in the next six months. Equities in Europe do best when excess liquidity --M1 growth in excess of inflation and nominal GDP growth--is high.

29 June. 2015 Greece to Dominate Markets - Dollar, Treasuries to Benefit (Publication Centre)

The Eurozone is on the brink of its first exit this week after the ECB refused to offer incremental emergency liquidity to Greek banks, forcing the start of bank holiday through July 7--two days after next weekend's referendum--and beginning today. We have no doubt that if the banks were to open, they would soon be bust; bank runs have a habit of accelerating beyond the point of no return very quickly.

5 June. 2015 The ECB's Year-End Inflation forecast is probably too low (Publication Centre)

The violence of recent bond market weakness likely has been driven mainly by reduced liquidity, and a squeeze in crowded positions. But we also think that it can be partly explained by an adjustment to higher inflation expectations. The latest ECB staff projections assume the average HICP inflation will be 0.3% this year, up from the zero predicted in March. Allowing for a smooth increase over the remainder of the year, this implies a year-end inflation rate of 0.8%.

25 Nov. 2015 Privatisations Conceal Underlying Health of Public Finances (Publication Centre)

The Chancellor is likely to announce plans for additional public sector asset sales in today's Autumn Statement, to help arrest the unanticipated rise in the debt-to-GDP ratio this year. But privatisations rarely improve the underlying health of the public finances, partly because assets seldom are sold for their full value. And the Chancellor is running out of viable assets to privatise; the low-hanging, juiciest fruits have already been plucked.

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