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Global

After decades of rapid globalisation, national economies and financial systems are more closely connected than ever before. At the same time, open markets and free competition are increasingly under criticism and even restricted. A major part of the work of Deutsche Bank Research therefore focuses on how Europe fares in an international comparison, how changing structures and the regulatory framework influence the development of financial service providers, their clients and financial markets globally, and which opportunities and risks result from long-term megatrends such as climate change, demographic change, digitalisation and new forms of mobility.

224 (151-160)
April 25, 2017
Analyst:
Politics remain a key focus for markets, but the latest developments in Europe are positive. In France, the first round of the presidential election ruled out the least market-friendly ‎outcome, and although eurosceptic Marine Le Pen is in the run-off as expected, polls suggest reformist Macron should win. The snap election called in Britain for June is a material positive game-changer for Brexit negotiations.
Beyond politics, focus has been on fading conviction in so-called Trump trades – higher inflation expectations and interest rates and buoyant risk assets – following speed bumps on the US domestic agenda and increased geopolitical tension.
But with global macro momentum solid – though off recent highs – and global growth expected to pick-up next year and approach 4% in 2018, do not dismiss inflation risks, especially in the US. Indeed the macro backdrop comforts the view that we are past peak central bank easing. The Fed will likely raise rates twice more this year and announce the start of the unwind of its balance sheet. The ECB is on track to announce a taper of its quantitative easing programme later this year, but the tone at the April meeting should still be quite cautious.
We have revisited our currency views. The snap UK election caused us to increase our sterling forecast but did not alter our medium-term bearish stance. We still expect the euro to break parity but the sequencing of the ECB's tightening policies is key: a shift toward rate rises rather than a withdrawal of quantitative easing would be bullish for the euro. In rates, we expect bond yields to climb beyond near-term election risk. In credit we expect the low default environment to persist. We see valid counters to the consensus view that European equities should outperform US equities.
David Folkerts-Landau, Group Chief Economist
Key pages this month:
P6 French election updateP7 UK snap electionP10 Fading Trump tradesP11 Don’t dismiss inflationP19 Updated views on sterling and euro [more]
151
March 30, 2017
Analyst:
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. [more]
152
November 23, 2016
Analyst:
Despite a growing role of electronic payments, demand for cash is on the rise in Europe. Euro cash in circulation has increased to EUR 1.1 trillion, three times as much as in 2003. Cash limits the power of monetary authorities, provides data protection and can therefore act as a guarantor of civil liberties. On the other hand, it is often associated with a stronger shadow economy, even though the shift towards a cashless society seems to trigger higher levels of card fraud. [more]
153
May 24, 2016
Analyst:
The tremendous growth momentum in high-frequency trading seems to have reached its limits in recent years. The increasing cost of infrastructure and relentless competition within the industry are probably the first to blame. In addition, high-frequency trading firms are hardly participating in those dark pools where large block transactions are executed. Both trends are challenging their business model and trading strategies as high-frequency traders have seen their revenues and profits erode. Furthermore, forthcoming tighter prudential regulatory oversight may lead to an overhang of capacity in the high-frequency trading industry. [more]
157
April 13, 2016
A number of factors, including the decline in commodity prices, sizeable corporate foreign-currency debt, a strengthening dollar and the prospect of higher US interest rates, are weighing on the economic and financial outlook in the emerging markets (EM). The relative lack of reform combined with a weakening of some of the structural factors that underpin growth has raised concern about the medium-term outlook in many, but not all EM. [more]
158
January 28, 2016
Analyst:
The share of light trucks (such as pickups and heavy sport utility vehicles) in total vehicle sales has increased noticeably in the US of late, reaching a new high of over 60% at the end of 2015. This came at the expense of conventional passenger car sales. The huge slide in oil prices, and thus petrol prices, quite obviously encourages this shift in preferences, as fuel costs become less of an issue for drivers. This is not a favourable development for the German automakers. After all, they command just 4.7% of the light truck market in the US. By contrast, they boast a 12.3% share of the passenger car segment. [more]
160
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