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May 23, 2018
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At 0.3% qoq, German GDP growth in the first quarter of 2018 slowed markedly compared with 2017, when GDP rose by an average of 0.7% per quarter. Whilst this was partially attributable to temporary factors, the large number of vacancies is gradually becoming a stumbling block for the German economy. Manufacturing, in particular, has been hard hit of late, with the number of job openings in the first quarter of 2018 up by 38% on the same period a year earlier. [more]
May 14, 2018
Developments in artificial intelligence and robotics have far-reaching economic and sociopolitical consequences, with some of them already materialising today. Still, the implications of further progress in these fields are not well understood. Economies around the world are likely to be impacted differently by the diffusion of AI technologies and robotics as wealthy industrial countries might increasingly “re-shore” production. To forge ahead and maximise the benefits for economies and societies, a balance needs to be found globally between successfully promoting key technologies and industries and avoiding the risk of rising protectionism and "knowledge wars". As the pace of technological change and the related launch of new business models are unlikely to slow, the ability of the state and regulators to keep pace is challenged. [more]
May 10, 2018
Emerging Markets and the Global Economy in the Month Ahead: The source of the recent correction is benign: a repricing of US growth with the EU still poised to grow above potential. With few exceptions (such as Turkey and Argentina) EM inflation remains mostly near or below targets so that forex (FX) weakness is unlikely to trigger meaningful CB responses that could disrupt EM growth – which has yet to catch up with DM. However, USD strength poses a more binding and direct risk of tighter credit conditions for EM than US yields. Still, we would need to see EUR/USD closer to 1.05 for credit conditions to bind. [more]
May 10, 2018
Analyst:
The Panmunjom Declaration by the two Koreas reiterates their earlier calls not only for a permanent peace and the denuclearization of the Korean Peninsula, but also for economic cooperation as set forth in the 2007 Declaration. The latter identifies various infrastructure projects that would see South Korea integrated into the Eurasian continent through North Korea. These could result in significant cuts to South Korea's transportation and fuel costs. Moreover, broader economic cooperation between the two Koreas would give South Korea access not only to North Korea's cheap, literate, and highly organized labor but also its vast natural resources. Although the Panmunjom Declaration also calls for disarmament of the two Koreas, any significant progress in this area, as well as in broader economic cooperation, depends on a potential US-NK nuclear deal. Given past experience, the negotiation and implementation of a US-NK agreement is likely to take many months at least. In this report, we discuss potential benefits that South Korea could enjoy from economic cooperation with North Korea. [more]
May 8, 2018
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Weaker recent data – too early to throw in the towel, but 2018 GDP forecast cut to 2%. Although German Q1 GDP growth now looks like reaching around ¼% qoq, we still expect some positive payback in Q2, as some temporary factors depressing activity should disappear. Corporate investment spending will be key for growth in the remainder of the year. Unfortunately, signals from proxy indicators have become somewhat mixed recently too. Notwithstanding a likely, albeit limited, Q2 rebound in activity, the strong drop in the expectations' component of the ifo business climate suggests that we have probably passed the peak in qoq growth rates in the current cycle. Due to the weaker Q1 we have lowered our GDP forecast for 2018 from 2.3% to 2.0%. (Also included in this issue: industrial producer and import prices, labour migration, fiscal policy) [more]
May 2, 2018
With trillions in currencies exchanging hands every day, foreign exchange is indisputably the world’s largest and most liquid financial market. Yet in spite of its size, this report argues that it is also likely to be the least "efficient" compared to other asset classes. [more]
April 23, 2018
Markets have been on their toes since the correction that started at end-January. Listless trading certainly reflects this malaise: major equity indexes have not suffered another sharp selloff but nevertheless remain near their year-to-date lows. While fundamentals remain robust, geopolitics and trade war fears, concerns over slowing global growth, and idiosyncratic issues in the tech sector have all weighed. [more]
April 23, 2018
To what extent does a social media storm influence stock prices? Has the stock market fully priced bad news? Could you predict whether a data protection breach would have a material impact on the affected company’s stock price? [more]
April 19, 2018
When will the next major default cycle occur? We assess lead indicators of previous default cycles in an attempt to predict the timing of the next one. Most indicators with a relatively short lead time suggest no imminent concerns of rising defaults through 2018. But some longer-term lead time indicators are starting to issue warning signs. Much can change over the next 12-24 months to shift the outlook, but H1 2020 looks a realistic start of the next major default cycle based on our analysis at this stage. [more]