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The House View : Taking a step back

July 25, 2017
As markets enter into the summer lull, it is useful to take a step back. The global economy is in better shape than it has been in several years. This has allowed other central banks to follow the Fed and gradually start their exit journey, a process that is a historic challenge given the unprecedented level of monetary accommodation. But with inflation still below target, a key part of the normalisation puzzle is still missing. Although labour market tightness has not yet fed to wages, and hence to inflation, we expect it will. Core inflation should move higher over the medium-term in the US and Europe, supporting further monetary tightening and a normalisation of yield curves. While no policy change is expected by the Fed on 26-July, an announcement to begin phasing out its balance sheet reinvestment is likely in September and we expect another rate hike in December. As for the ECB, rate hikes are still far off, and we expect the central bank to announce another QE extension and tapering in October. Our global macro outlook is little changed this year. We expect growth to rebound from the slowest pace post-crisis in 2016, though relative to consensus we are more positive on the US and more bearish on Japan. In China, we continue to expect a gradual deceleration, but see upside risks to growth in the second half of the year. We are generally constructive on risk assets, expecting material upside to US equities in the next 18 months and positive but more balanced performance in EM. There are signs the dollar has peaked, but we do not expect a material devaluation yet. We are more positive on the euro, seeing upside versus the dollar and sterling. We expect yield curves to normalise gradually, but there is risk of a more sudden upward shift, depending on the path of core inflation. David Folkerts-Landau, Group Chief Economist Key pages this month: P6 Global economy in a better place P8 Central banks overview P11 Current low inflation regime vs. 1960s and 1980s P17 Signs of dollar top You can access a two-page update of Deutsche Bank Research's views on global macro, monetary policy and markets, as well as some of the key themes driving them, at any time by downloading The House View Snapshot from: houseview.research.db.com. [more]

More documents about "International"

159 (121-132)
July 16, 2013
121
Frontier CIS economies have grown at a robust rate of 8% yoy on average since the turn of the century. Growth prospects for 2013-14 remain fairly positive at around 5% p.a., with stronger growth expected in the Central Asian CIS economies. Trade links with Russia have diminished significantly, although they remain substantial. China and emerging Asia are becoming increasingly important trade partners for the region. Some of the countries have been implementing structural reforms, but much needs to be done to strengthen institutional and policy frameworks, develop financial markets, diversify away from commodities and improve the business climate and governance more generally. [more]
July 15, 2013
122
Sub-Saharan Africa (SSA) is growing fast with annual real GDP growth of over 5% in the last decade, second only to developing Asia. Medium-term growth remains robust, on the back of a recovering global economy, still high commodity prices and investment in productive capacity. SSA is at a crossroads. It has a window of opportunity to capitalise on its youth surge and resource wealth to create employment and inclusive growth. Political change and reforms are key. It will not be easy but democratisation, urbanisation and virtual connectedness bode well. Investments in infrastructure/logistics and education, economic diversification, market reforms and improved governance are critical for long-term success. [more]
June 14, 2013
123
ASEAN, a bloc of 10 nations with an aggregate economic size of USD 2.3 tr, is preparing to go through profound changes. Already today, ASEAN is the 3rd pillar of growth in Asia in addition to China and India, with average GDP growth over the past 15 years at around 6% p.a. The region’s prospects will be much enhanced by an ambitious integration effort which seeks to achieve a single market and production base. The ASEAN Economic Community (AEC)'s envisaged launch at the end of 2015 will be a potential game changer for ASEAN. [more]
June 10, 2013
124
This study reviews how Japanese banks have responded to the adverse macroeconomic environment during the past ten to twenty years. The experience of Japanese banks provides some valuable insights into the effect of a prolonged phase of low interest rates on bank balance sheets and profitability. Banks have adapted both the cost and income drivers of their business. Profitability and efficiency gains have been limited though. While Japanese banks have reduced their bad loan problem, they have also become increasingly exposed to their home sovereign. [more]
May 3, 2013
125
With banks searching for sources of income and growth and the relationship of trust with their customers being redefined, pricing is a key issue in retail banking. Price-setting calculations for retail financial products can be quite complex and one crucial factor for success is the capacity to identify and collate all necessary information to take sound decisions on this basis. While the range of analytical options has grown considerably in recent years, the challenge banks are facing is to use them intelligently to develop client-oriented offers. To complement their pricing, banks also need convincing strategies to communicate the prices and value-propositions of their products. [more]
January 25, 2013
126
In this study, we analyse some of the political and economic consequences of the Arab Spring and assess opportunities and challenges for the affected countries. Political instability has taken a toll on the region’s economies. There has been a sharp slowdown in economic activity, deteriorating external and fiscal accounts and decreasing FX reserves. The long-term challenges for the region remain as pressing as ever: high unemployment (especially among the youth), inefficient subsidy regimes and low trade diversification, among others. Expectations for rapid improvement after the Arab Spring will be disappointed, but there is a chance that less oppressive governments will be more responsive to their peoples’ demands and thus at least attempt to tackle those problems. [more]
January 16, 2013
127
The Foreign Account Tax Compliance (FATCA) provisions of the U.S. Internal Revenue Code comprise an important broadening of the international reach of the U.S. tax system. This law is aimed at countering tax evasion by U.S. citizens and residents who receive earnings from assets held offshore. Currently a growing number of Intergovernmental Agreements between the United States and partner countries are being negotiated to overcome the conflict of laws issues raised by the application of FATCA as well as to simplify implementation and reduce compliance costs. [more]
October 18, 2012
128
We expect the Asian frontier markets (AFMs) to be on a solid and accelerating growth path over the next five years, with real GDP growth potentially rising to 7-8% annually. All of the countries are expected to be members of the WTO by 2017. Trade at the regional and international levels is expected to deepen and drive growth in these countries. There are some risks to this constructive outlook such as natural catastrophes, political instability or even risks that could arise from rising interdependence with the global economy. Beyond these immediate risks, there are important challenges to tackle such as poverty reduction and protection of the environment and the national heritage. Improvement on these fronts will help the AFMs maintain their attraction for FDI flows. Finally, economic reform will need a more commercially-driven banking sector and financial markets, as well as a robust regulatory regime. [more]
July 27, 2012
129
Since 2006 the European Union has increasingly been looking to sign deep and comprehensive free trade agreements with emerging markets. In the meantime it has also been turning its attention to some industrialised nations. A trade agreement with South Korea has already come into effect. Although the EU is pinning great hopes on India and a number of ASEAN states, it is also keen to conclude similar agreements with Mercosur, Canada, Ukraine and virtually all of the Southern Mediterranean countries. It is even considering Japan and the United States as potential partners. If the European Union's bilateral free trade strategy were fully implemented by the end of this decade, it would give a moderate boost to trade, welfare, growth and employment in the EU and would often provide a much stronger stimulus in the partner countries concerned. This free trade strategy is also highly ambitious in terms of its diplomatic objectives because issues that have so far received insufficient attention – such as trade in services, technical trade barriers and foreign direct investment – are to be better regulated. Whether the EU – currently the world's largest trading bloc – is ultimately successful with this strategy will in many cases be decided by domestic politics in the partner countries. The fundamental question of whether a deep bilateral strategy should perhaps be complemented by a parallel multilateral approach as a matter of considerable urgency will be especially pertinent in transatlantic relations. However, there is also a risk of tensions within the international system. [more]
January 20, 2012
Analyst:
131
The US car market is recovering from its deep crisis. Unit sales and production are likely to increase further in 2012 und 2013. In the medium term, previous record levels will be reached again or even exceeded. German producers should benefit from this development. Their market share in light vehicle sales will grow further. This is due to the attractive product range and the bolstering of production facilities in the US. Diesel and hybrid vehicles will expand their market shares in the US over the next few years. Growth in the diesel market in particular would benefit German companies. [more]
December 8, 2011
132
The U.S. state and local government sector undoubtedly faced significant short-run challenges brought about by the 2007-2009 recession which are likely to partly persist over the next few fiscal years. Yet, warnings of state bankruptcies and mass defaults at the local level are unduly exaggerated. All in all, a satisfactory assessment requires the separation of cyclical revenue problems from looming long-term challenges in pensions and healthcare. Although they do not pose an imminent threat yet, state and local pension funds and retiree healthcare commitments are in dire need of reform in order to keep them affordable. Moreover, to improve their finances, subnational jurisdictions need to correct the structural flaws in their revenue systems and budget processes and increase the effectiveness of spending to curtail the unsustainable ballooning of costs. [more]
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