On July 21, the ECB announced that it would raise the interest rate on the deposit facility from -0.5% to 0%, effective July 27. By the end of that very month, banks in Germany had reduced their stock of banknotes and coins by a record EUR 11 billion. There is much to suggest that they will continue to reduce their non-interest-bearing cash holdings, as the ECB interest rate will rise further to 0.75% in mid-September. [more]

The two big drivers of corporate returns over the last decade have been upended in 2022. Specifically, corporates can no longer rely on higher debt or fatter profit margins as they have done post-financial crisis. Instead, to increase returns on equity, they might need to focus on generating more sales from existing assets - in other words, boost their asset turnover. [more]

New Podzept Podcast. The big bust in share prices of Alternative Food stocks has echoes of the dot.com boom & bust in 2000. Yet, just as the bursting of the tech bubble did not stop the inevitable development and adoption of technology, Deutsche Bank Research see the Food Tech revolution as likely continuing despite the cooling of last year’s market euphoria. Olga Cotaga and Luke Templeman, both Thematic Research Analysts, discuss the growth potential in the industry as it continues to simmer, but with the potential to change food as we know it. [more]

‘Q&A with’ speaks to Tim Rokossa, Head of Company Research, Germany and Head of Autos Research. Tim and his team have just been ranked No.1 in the Institutional Investor’s 2022 All-Europe Research Team. Tim shares his outlook on what’s next for the automotive sector as it faces numerous challenges. [more]

For the financial sector, sustainable finance is steadily moving up the priority list. It is about incorporating environmental, social and governance (ESG) considerations into finance. The global volume of ESG-labelled assets grew to USD 35 tr in 2020 and may reach USD 41 tr by the end of this year. Despite strong growth, sustainable finance still faces obstacles such as the absence of a universally accepted definition of ESG and a lack of data on ESG metrics. Regulation is trying to keep pace with market dynamics to facilitate the flow of funds into sustainable activities. Key initiatives include the establishment of taxonomies, disclosure rules and product-related regulation. In the short term, sustainable finance faces headwinds from adverse macroeconomic conditions and emerging regulatory requirements, but the fundamental growth drivers remain intact. [more]

In an unusual constellation, the banking industry is at the same time suffering and benefiting from the current difficult macroeconomic situation. Inflation is driving up expenses, but also triggering a monetary policy normalisation which has fuelled a jump in net interest income. Meanwhile, recession fears require higher loan loss provisions. The net effect has been manageable so far, but is hard to foresee in the second half of the year. The largest capital distributions to shareholders since the financial crisis have pushed the CET1 and leverage ratios lower, though they remain at robust levels. Balance sheet growth has accelerated due to buoyant corporate and mortgage lending, but this may not last given the looming economic slowdown and further interest rate increases. [more]

July saw a notable rebound in equity and bond markets – albeit perhaps counterintuitively, given how initially worse economic data had sparked expectations of a dovish Fed pivot. But then investors had to adjust expectations again, after July employment numbers suggested that the Fed may stay on course. According to Blaz Zlicar, markets will continue to be in a state of flux: inflation vs growth. He says “That is the name of the game these days”. Watch this video for more. [more]

Rising mortgage rates and shortages of building materials led to a shock of uncertainty in the housing market over the last months. But there are many countervailing effects. Hence, it is not set in stone that the house price cycle comes to an end. [more]

In a new ‘Q&A with’ Mallika Sachdeva, Asia Macro Strategist, introduces a newly launched Deutsche Bank’s Asia Corporate Newsletter, what market environments corporates are likely to face in the coming quarter and what the longer-term themes most pressing for corporates are. [more]

The German labour market held up well during the pandemic and even gained momentum from 2021 onwards. In the meantime, a shift in the employment structure took place that brings the shortage of skilled labour back into focus. [more]