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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"

160 (133-144)
December 8, 2011
133
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]
July 4, 2011
Analyst:
135
CCS is only one pillar in international climate protection policy, but certainly an important one. However, it currently does not seem likely that this pillar will be able to bear its load as planned for the coming two decades. Without CCS, though, the 2°C target would be in even greater jeopardy than it already is. Politicians’ general commitment to CCS and the realisation that the technology can make a valuable contribution to climate protection must therefore be followed by action: first and foremost, further research must be carried out and, second, price signals for CO2 would be required for its implementation. [more]
June 28, 2011
136
The world trade regime has reached an historic crossroads. Conclusion of the Doha Round this year could give global trade a significant boost. If the negotiations break down, in the medium term the international community faces the prospect of a relapse into tit for tat in trade policy. To bring the Doha Round to a successful conclusion political leadership is necessary – in the big emerging markets as well as in the US and EU. The former also stand to reap substantial gains from reciprocal market liberalisation. [more]
June 9, 2011
137
The financial crisis dealt international banking a serious blow. This paper reviews 1) the extent to which financial markets have become global in recent years as well as the damage inflicted on cross-border linkages by the financial crisis, 2) the reasons for the internationalisation process and 3) prospects for international banking in the “new-normal” environment. Apart from market developments, this reflects a new focus in the political and regulatory debate aimed at increasing the – mostly domestic – grip on the banking industry. [more]
June 29, 2010
138
In real life people do not always decide rationally on the basis of established preferences and complete information. Much of their behaviour is caused through their trying to cope with the complexity of the world around them by approximating. As a rule these approximation methods deliver serviceable results, but they often also lead to distorted perceptions and systematic errors. To avoid making flawed decisions, investors and investment consultants should be aware of these effects when assessing financial products, when estimating factors of relevance to investment performance and their own appetite for risk, and when considering their personal investment behaviour. [more]
June 1, 2010
Analyst:
139
The world’s water markets are confronted with major challenges. The increase in the world's population and higher incomes in developing countries and emerging markets are going hand in hand with a rise in demand for food, energy and other goods. This is resulting in increased demand for water. Climate change will amplify many water-related problems and create new ones. We put the annual investment required in the global water sector at about EUR 400-500 bn. Governments will not be able to raise the funding needed on their own. For this reason, we believe it makes sense for governments and the private sector to cooperate more closely. Makers of “water technologies” will have huge sales potential awaiting them in the coming decades. We have used a scoring model to rank the attractiveness of various countries for investments in the water industry. Among the economies that ranked best are many countries from the Middle East, but also the heavily populated countries of China and India as well as the US and Germany. In principle, though, all countries require a substantial amount of investment in the water sector. [more]
May 14, 2010
140
Final direct cost of the crisis for taxpayers may remain below 1% of GDP in most developed countries. This is only a small fraction of original commitments and also much lower than initial gross expenditures. Direct fiscal costs are in the end unlikely to exceed 2% in the US and 1% in Germany, while banking-sector rescue programmes in France and the UK might possibly even return a net gain. [more]
February 12, 2010
142
Well aware that small farmers are key to world food security, agribusiness players are increasingly partnering with them. They are taking practical steps to secure farmers’ financial success in a sustainable way and integrate them into the global food supply chains... [more]
September 21, 2009
143
Production, distribution and access to food are being redefined by new and ongoing forces. Increased scarcity of natural resources, growing demand for food, changing nature of consumption and climate change are posing serious challenges to ensuring food security for the next decades. Still, we believe that the 9 billion of us in 2050 can be fed provided that we make the right decisions. Cross-sectoral innovation is essential, as well as changes to the current systems for producing, distributing and consuming food. Reforms are also crucial in the areas of agricultural support, food aid, trade liberalisation, support regimes for biofuels and intellectual property rights. [more]
July 30, 2009
144
Some years prior to the crisis, abundant global liquidity and investors’ strong risk appetite boosted asset prices to very high levels. The state of the global economy and financial markets deteriorated dramatically when the subprime crisis turned into a full-blown global banking and economic crisis. Central banks around the world were forced to inject extra liquidity to support the banking sector, the credit channel and the overall economy. Despite the presence of global excess liquidity short and medium-term risks to CPI inflation appear to be limited because of low capacity utilisation and rising unemployment. However, excess liquidity could still potentially stoke new asset price bubbles. Central banks are aware of this risk and are at the moment preparing post-crisis exit strategies from their current accommodative monetary policy stance. [more]
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