When smooth waters cause ripples

It is proving to be a healthy quarter of results for US banks and the outlook is fine, regardless of what might or might not happen about regulation. The banks have decent economic growth to thank for much of their own health. Higher interest rates have been good for bank lending and net interest margins … Continue reading “When smooth waters cause ripples”

UK GDP growth remains sluggish

Latest figures from the Office for National Statistics show the UK economy saw a small pick-up in GDP growth, but the overall environment remains sluggish. The preliminary estimate shows second quarter GDP growth at 0.3% compared to 0.2% in the first quarter, and matching consensus expectations. To put the recent growth figures into context, the … Continue reading “UK GDP growth remains sluggish”

Could politics structurally alter the economic backdrop?

With 5 July having marked ten years since the Bank of England (BoE) last raised UK interest rates, we assess the state of the economy and its prospects in light of recent political developments. Although the UK economy has shown resilience since last year’s Brexit referendum, its growth rate decelerated in the first quarter of … Continue reading “Could politics structurally alter the economic backdrop?”

New Dawn for India’s Solar Dreams

India isn’t a country you would associate with environmental stewardship. The Ganges River, an object of veneration for Hindus, is famously polluted; the country hosts 13 of the world’s 20 most polluted cities, according to the World Health Organisation; last year you could even see the smog hanging over New Delhi from outer space. Indeed, … Continue reading “New Dawn for India’s Solar Dreams”

Chinese growth beats forecasts but looks set to slow

Chinese growth once again surpassed expectations in the second quarter, growing 6.9% year-on-year (y/y), unchanged from the first quarter. This should ease fears over the ongoing credit tightening in China, though we still expect a growth impact to come through in the second half of this year. Manufacturing growth accelerates A key contributor to the … Continue reading “Chinese growth beats forecasts but looks set to slow”

Global liquidity and emerging markets

Emerging markets have benefited from an extremely accommodative environment but global liquidity conditions are becoming less easy than they used to be. Today we find ourselves in a world where central banks are reviewing their unconventional stimulus measures. The European Central Bank (ECB) is discussing tapering quantitative easing (QE) while the Federal Reserve (Fed) is … Continue reading “Global liquidity and emerging markets”

Why we are still optimistic

When we sat down this week to review world markets and world economies the surprising thing was how few surprises there have been so far this year. We expected the euro to survive its brushes with mortality in the Dutch and French elections. It has done so. We like many have forecast reasonable growth of … Continue reading “Why we are still optimistic”

Consumers under pressure as UK inflation continues to rise

More bad news for UK households. The annual rate of consumer price index (CPI) inflation rose from 2.3% in March to 2.7% in April – higher than consensus estimates of 2.6%. Meanwhile, the retail price index (RPI) measure of inflation jumped from 3.1% to 3.5% over the same period, also slightly higher than consensus expectations. … Continue reading “Consumers under pressure as UK inflation continues to rise”

China: policy support offsetting structural headwinds

Despite concerns that China’s economy was undergoing a ‘hard landing’ in January 2016, fiscal, monetary and other government policy stimulus ensured that it was growing slightly faster at the end of the year than it had been at the start. Nevertheless, with the country in the middle of a structural transition from investment towards consumption, … Continue reading “China: policy support offsetting structural headwinds”

Is populism good for markets?

Populist policies appear good for markets, given the performance of equities following the Brexit and Donald Trump votes. However, we would note that the conditions for a rally (dovish signals from the Federal Reserve (Fed) and signs of a global recovery) were already falling into place last summer, before either of these two events took … Continue reading “Is populism good for markets?”

Change from China?

There was little fuss when China overtook the US as the world’s largest economy, as measured using figures corrected for relative purchasing power.   There was more concern in the US as China asserted itself by claiming the nine dash line from Taiwan round to the Paracel islands, seeking control over a series of islands … Continue reading “Change from China?”

Increasingly hawkish language from the Federal Reserve

Although US economic growth proved somewhat disappointing during the final quarter of 2016, Fed policymakers appear ready to increase interest rates as soon as it becomes appropriate; indeed, Fed Chair Janet Yellen warned that an unnecessary delay in tightening could prove “unwise”.  Meanwhile, European investors faced fresh uncertainties surrounding Greece’s financial bailout. Leading equity markets … Continue reading “Increasingly hawkish language from the Federal Reserve”

Sterling weakness and plenty of money

The UK has been battling down its government deficit for the last seven years.  In the March Budget book they forecast an annual deficit of £55bn for the present year, down from £72 bn this year. They also forecast a falling path for UK state borrowing as a proportion of our GDP, with net debt … Continue reading “Sterling weakness and plenty of money”

Where do you find a good yield?

Part of the big idea of Central Banks creating money and buying bonds is to drive other investors to buy riskier assets. They want to stimulate more activity. They hope that by taking interest rates down to very low levels some people will spend more instead of saving, and others will be more adventurous with … Continue reading “Where do you find a good yield?”

A bull in the China shop?

The Chinese stock market has been making some upward progress this year after the dramatic boom and bust cycle it went through in 2015. The authorities had a plan to involve more Chinese people in the stock market, and to gradually open Chinese shares to more foreign capital and influence. Unfortunately for them, individual investors … Continue reading “A bull in the China shop?”