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    Monetary turnaround and more expansionary fiscal policy push yields upwardsoverlay
    February 26, 2018
    Chart in Focus
    Since the beginning of the year, both short-term and long-term government bond yields have risen considerably in the developed markets (i.e. the US, the euro area and the UK; Japan is an exception), even though they are still low.
    Video: Myths, misconceptions and misunderstandings – Bitcoin fact checkoverlay
    February 19, 2018
    Opinions differ when it comes to bitcoin. Discussions are triggered largely by bitcoin’s spectacular price increasess and are not very informed or nuanced. In this paper we focus on several standard claims, which we will put into context and, if necessary, rectify. This will hopefully help our readers to familiarise themselves with the topic.
    Why would we use crypto euros? Central bank-issued digital cash – a user perspectiveoverlay
    February 15, 2018
    EU Monitor
    The rise of bitcoin and other cryptocurrencies and the decline in cash payments are the background for a new concept: digital cash issued by central banks. An old academic debate about who creates money and how is resurfacing, but what about the user’s perspective? Why would we use crypto euros? Such digital cash would compete against bank deposits, physical cash and private cryptocurrencies to win over consumers in the areas of payments and savings.
    European banks: Shrink to (pro)fitoverlay
    March 19, 2018
    Talking Point
    The major European banks have seen their revenues stabilise in 2017, and through further cost-cutting and improvements in asset quality, their profitability rebounded strongly to the second-best figure in the past decade. However, banks continued to shrink, and both total assets and risk-weighted assets fell substantially. This helped capital and leverage ratios to reach new record highs, finally laying questions about the sector’s capitalisation levels to rest, at least on aggregate. Large European banks lost ground versus smaller competitors and also remained far behind their US peers, although they were able to catch up somewhat on this front.
    Post-Brexit EU budget – the next hot button issueoverlay
    February 28, 2018
    EU Monitor
    2018-2019 will be crucial for the future of EU finances. Compared to previous MFF negotiations, this time the challenges ahead are disproportionally larger, including a large annual budget gap of above EUR 10 bn to be left by the UK's exit from the Union. Our scenario analysis illustrates that Western and Northern European members would see their net contributions deteriorate most in case of a substantial budget expansion in order to cover the UK shortfall as well as additional spending needs. Eastern European members would be hurt most by the alternative of harsh spending cuts to close the Brexit gap in the budget. To complicate matters further, the abolishment of the UK rebate and probably all "rebates on the rebate" will lead to a redistribution of costs among members. Profound discussions will therefore be necessary regarding the prioritization, efficiency, subsidiarity and cost sharing.
    Economic policy uncertainty in Europe: Detrimental to capital markets and bank lendingoverlay
    January 23, 2018
    EU Monitor
    Economic policy uncertainty in Europe has risen to extraordinarily high levels. This stands in stark contrast to conventional measures of financial market uncertainty which are at historical lows. Uncertainty surrounding economic policies has negative spillover effects to the rest of the economy. It tends to be transmitted to capital markets and to result in higher financing costs for companies. Significant cross-country transmission of economic policy uncertainty is observable within the EU, with the UK being a net exporter. In addition, banks could turn out to be a central channel through which economic policy uncertainty is transmitted to the real economy, via subdued lending to non-financial corporations, in particular to SMEs.
    Looming driving bans in times of declining nitrogen oxides emissionsoverlay
    March 16, 2018
    Talking Point
    Nitrogen oxides emissions (NOx) in Germany plunged by 44% between 1995 and 2016. Road traffic recorded the sharpest decline (-62%). After the decision of the Federal Administrative Court in Leipzig, however, certain diesel vehicles can be banned from inner cities. Apparently, there is a conflict of interests between the human right to clean ambient air and the protection of diesel car owners against an erosion of their vehicles‘ value. In our view, this conflict could be resolved over time. To this end, policymakers could, for instance, introduce a Blue Badge for low-emission diesel passenger cars, which is tied to a transitional period for older vehicles.
    Strong growth, limited inflationoverlay
    March 13, 2018
    Focus Germany
    Despite the unexpected weakness of domestic demand in H2, sluggish January retail sales and production data and a downshift in industrial surveys in February, we believe that the German economy's boom will continue in 2018, given the elevated levels of these surveys, capacity utilization or order books. The booming economy is reflected in a clear pick-up in agreed pay increases and a strong wage drift. Still, our model shows an only limited pass-through into core inflation, which will rise towards 2%. As the price pressure in volatile components (food, energy) is abating headline inflation will move more or less sideways in 2018/19.
    Coalition treaty – myopic policy approachoverlay
    March 7, 2018
    Standpunkt Deutschland (Engl.)
    From the start, the negotiations were ill-fated. To begin with, the SPD leadership rejected a revival of the grand coalition (Groko). Then, the partly diametrically opposed interests of the parties involved, seemingly abundant financial scope and a lack of interest in fundamental reforms on the part of the German population led to a – in many areas – mixed bag of measures which, on balance, aims to further increase governmental control of the business sector and society at the expense of individual freedom. However, at present, the predominant feeling is relief that Germany now has a “decent“ government. But not only the coalition partners may soon wonder whether the price is too high.
    The persistence of zombie firms in a low yield worldoverlay
    March 1, 2018
    Further research articles
    In the fourth part of our series on the impact of rising yields, we discuss the rising incidence of zombie firms in recent years. Bottom-up data of some 3,000 companies in the FTSE All World index show that the percentage of zombie firms has more than tripled to 2.0% of firms in 2016 from 0.6% in 1996. Such firms are defined as those with an interest coverage ratio under 1x for 2 consecutive years and a price to sales ratio under 3x. That matters because zombie firms are linked to fading business dynamism and because years of low interest rates should have led to fewer such firms, not more. There are early signs we are at a turning point, however. The numbers for 2017, with two-thirds of firms reporting, suggest that zombie firm incidence declined sharply last year. If this proves to be a real trend, it may give central banks confidence that continuing to raise rates and pull away from unconventional monetary policy will have some advantages.
    FX Special Report: Yes, it all makes senseoverlay
    January 25, 2018
    Further research articles
    The lead market commentator of the Financial Times this morning writes that the dollar sell-off has “stopped making sense”. Indeed, viewed with the post-crisis lens of activist central banks and exceptionally tight correlations between FX and rates the dollar is entirely out of line with fundamentals. But currency moves over the medium-term ultimately boil down to one thing: flows. If inflows into an economy pick up the currency strengthens and vice versa. Looked at from a flow perspective, the dollar bear market makes complete sense: our outlook for FX 2018 argued that the flow picture is exceptionally supportive for EUR/USD and this positive dynamic is currently playing out.
    Beacon of stability: The foundations of Germany’s successoverlay
    December 15, 2016
    Standpunkt Deutschland (Engl.)
    Germany remains an anchor of steadiness with an undisputed role as leader in Europe and is the only country that comes close to being on a par with America. This story of success is based on many structural factors, some of which complement and mutually reinforce each other. We group them as follows: (1) Macropolicies focused on stability and growth (2) Institutions grounded in German ‘ordoliberalism’ (3) Global companies with unique structures (4) An equitable system of social security and cooperative social partners (5) A long-term perspective by companies and citizens with the willingness to forgo immediate reward – in our view the most important factor in the success. The combination of innovative, multinational companies, functioning institutions and highly skilled workers will, in our view, maintain Germany’s competitiveness and prosperity into the future. German politicians are therefore confronted with the increasing challenge of holding the eurozone together. However, if anti-euro movements gain the upper hand in key partner countries, thereby increasing the disruptive risks, there may be a reassessment in Germany of the euro’s costs and benefits.
    The House View
    Slow-burning issuesoverlay
    March 14, 2018
    The House View
    Robust, broad-based global expansion. Synchronised growth across regions and economies, in many cases at above-trend levels. We expect global growth to accelerate to +3.9% this year, marginally above 2017, as fundamentals remain supportive. We expect the US and eurozone to continue growing above potential, but do not anticipate any further acceleration. In China, we expect growth to slow, and are more worried about inflation and financial risks than consensus. 2018 should mark the peak of the current cyclical expansion; growth should decelerate from 2019.
    A healthy pullbackoverlay
    February 7, 2018
    The House View
    After a stellar 2017 and an even stronger January, risk assets have undergone a sharp pullback in the last week. Initially triggered by higher rates as markets repriced inflation expectations higher, the episode evolved into a technical spout of volatility exacerbated by programmatic strategies. The pullback is healthy, after a highly unusual stretch of market tranquility.
    The House View: Snapshotoverlay
    January 23, 2018
    The House View
    This edition reviews the global macro outlook, with 2018 likely marking the peak of the current cyclical expansion. Read on for our views on the US macro outlook and the Fed, the eurozone and the ECB, China’s macro outlook and risks. Find also a summary of our views on key themes as well as on the different asset classes and the main macro and markets forecasts
    13 Tipping points in 2018overlay
    January 15, 2018
    Konzept (Engl.)
    Against expectations, economies and markets powered ahead in 2017. Many predict more records to be broken in 2018. Yet, in many sectors, things are more complicated and 2018 may be the year of tipping points that augur unexpected change – both positive and negative. In this issue, we probe these tipping points and analyse the effects on economies and industries that investors may have ignored.
    Can markets withstand the removal of QE?overlay
    October 2, 2017
    Konzept (Engl.)
    Welcome to the eleventh edition of Konzept, Deutsche Bank’s flagship research magazine, which coincides with memories of the first stirrings of the financial crisis entering their eleventh year. This issue is published as the Federal Reserve starts rolling back quantitative easing, symbolising the post-crisis era giving way to the post-QE world. <br/>The withdrawal of QE, however, causes anxiety among investors. After all, central bank balance sheets and asset prices have climbed hand-in-hand since the crisis. Does the planned descent of the former necessarily lead to the latter following suit? All three features in this Konzept are devoted to testing this hypothesis.<br/>
    DeCAF – how to invest in a post-carbon worldoverlay
    March 30, 2017
    Konzept (Engl.)
    Decarbonisation initiatives to halve global emissions will dictate how much certain industries can produce over the coming decades. DeCAF – Deutsche Bank’s Carbon Alignment Framework – is a new investment approach which recognises that the volume goals of policymakers and value goals of investors are not necessarily aligned.