Macro-economy news

October 25, 2021

New Covid outbreak in China

While real estate is already expected to weigh negatively on the growth of the Chinese economy in Q4, a new wave of the variant delta epidemic is affecting 11 provinces and leading to new mobility restrictions for the population. Household consumption is expected to suffer, as it did in August. The slowdown in China…
October 22, 2021

Evergrande avoids default

The trend was rather optimistic in Asia after Evergrande, the Chinese property developer paid the interest due on a USD bond. There were 3 days left to do so before a formal default. Chinese authorities are clearly trying to buy time to come up with a credible crisis resolution plan, especially…
October 21, 2021

Inflation expectations on the rise

Equity markets in Europe and the US, with the exception of the Nasdaq, continued to rise modestly yesterday, still supported by corporate earnings. But inflation expectations are increasing and bond yields remain close to their recent highs. The Fed’s Beige Book delivered a state of play of the US economy tinged with…
October 20, 2021

First decline in Chinese property prices since 2015

New home prices in China fell marginally in September for the first time since April 2015. A new property developer, Sinic, was also unable to meet its commitments on a USD loan. The situation remains tense, although “manageable” according to the Chinese authorities. Markets that were driven by positive sentiment until…
October 19, 2021

Renewed optimism

ising equities, slightly easing bond yields, falling USD: optimism prevails despite the sharp slowdown in the Chinese economy highlighted yesterday by the Q3 national accounts. Concerns about rising inflation pushed the US 10-year yield up to 1.62%, but it then eased back to 1.57%. The EUR/USD exchange rate returned to its…
October 18, 2021

China’s GDP slows down significantly

China’s GDP growth fell to +4.9% yoy in Q3, but more importantly, GDP grew by only 0.2% qoq compared to the 2%+ variations in the summers prior to the 2020 crisis. Anti-Covid measures weighed on growth in August and power cuts took over to depress industrial activity in September. This can…
October 15, 2021

Long-term interest rates continued to fall ahead of important US indicators

Long-term interest rates fell again, although they are a bit on the rise this morning: the US 10-year is trading at 1.53%. US producer prices recorded their smallest increase of the year for the month, although they continued to accelerate yoy. This does not call into question the expected tightening of US monetary…
October 14, 2021

Inflationary risk still not taken seriously enough

The rise in the US inflation rate to 5.4% and the maintenance of core inflation at 4% in September reinforce the feeling that this transitory phenomenon linked to the Covid crisis… is bound to last. This is also what Fed members fear from the minutes of their last meeting. They confirmed that the announcement of a reduction…
October 13, 2021

Slight easing in bond yields despite increasing signs of inflationary pressures

The US 10-year yield eased slightly below 1.6% despite surveys showing increasing inflationary pressures. We mentioned the Bank of France survey yesterday, the main findings of which can be found here. But the NFIB survey of small businesses in the US also found that hiring difficulties are at an all time high and companies are…
October 12, 2021

Awaiting key US indicators

The US bond market was closed yesterday, bringing some calm after a sharp rise in yields last week that was not halted by the release of much lower than expected job creation figures. The equity markets are still down due to uncertainties in China (real estate, regulation, energy shortages and…
October 11, 2021

Inflationary pressures are building. Monetary tightening approaches

The US job report for September was not as bad as the weak job creation might suggest, as we explained here on Friday. The acceleration of wages is obvious and cannot leave the Fed indifferent: it should announce the beginning of the reduction of its asset purchases on 3 November. The markets will then…
October 8, 2021

Optimism returns to the markets but rates continue to rise

The temporary deal on the US debt ceiling also gives the Democrats time to agree on the stimulus packages that the Biden administration wants to push through. This may explain why the markets reacted so favourably to the lifting of a risk they never really took seriously (a US default). The sharp rebound…
October 7, 2021

Markets take some comfort from easing energy prices

The strong easing of gas and oil prices has allowed a slight easing of long rates. In addition, the fear of a US default is receding in the short term as both Republicans and Democrats seem ready to raise the debt ceiling until the end of the year. The debates on the Biden…
October 6, 2021

Equity markets yo-yo. Bond yields at their highest since June

Yesterday’s sharp rebound in equity markets should quickly come up against the wall of interest rates: the US 10-year yield rose above 1.57% this morning, its highest level since June. Inflation expectations are simmering. The 10-year break-even inflation rate in the UK is above 4% for the first time since 2008.…
October 5, 2021

The market is navigating between the pitfalls of inflation and lower growth

Equity markets continue to decline, particularly tech. stocks: the Nasdaq fell by more than 2% yesterday and is down more than 7% from its early September highs. Inflationary fears were boosted yesterday by the surge in oil prices, so that the US 10-year yield rose above 1.50%, before easing again…
October 4, 2021

Growth concerns outweigh inflation fears

The stock markets are back down this morning despite a rebound in the US markets at the end of the week, notably based on hopes for a drug against Covid. The Merk laboratory claims that its anti-covid pill can halve the risk of hospitalisation for patients suffering from the virus. With Chinese markets closed…
October 1, 2021

October is not starting very well

While September ended with the biggest decline in the US equity market since March, October starts with a sharp fall in Asia, particularly in Japan, despite a rather good BoJ (Tankan) survey. There is no shortage of cause for concern, as we have detailed here. To sum up, we have gone from…
September 30, 2021

Contraction of industrial activity in China but rebound in services

The August PMIs confirmed the negative impact of the power cuts on China’s industrial activity in September, with the manufacturing PMI falling below 50 for the first time since the Covid-19 outbreak in February. The sharp rebound in the non-manufacturing index from 47.5 to 53.2, on the other hand, shows that…
September 29, 2021

Markets adjust to central banks’ new deal

The US 10-year yield settled above 1.5%, up nearly 25bp over the week. The equity markets finally reacted, with tech stocks suffering the biggest losses (-2.83% for the Nasdaq). Inflationary pressures are not about to end, as evidenced by the surge in German import prices in August: +16.5% yoy, the first time…
September 28, 2021

Bond yields continue to rise. China reassures on the housing market

The US 10y yield reached 1.54% this morning, its highest level since June. The market is gradually integrating the prospect of monetary tightening, not only by the Fed, but by all central banks in the relatively near future. The Governor of the Bank of England has not ruled out a…
September 27, 2021

Germany and China in the spotlight

The German elections have produced an even closer result than expected. The outcome of the forthcoming negotiations to form a government coalition looks very uncertain. The SPD won by a narrow margin ahead of the CDU-CSU. The Greens and the FPD Liberals are following at a distance (see provisional results here). Of the possible…
September 24, 2021

Return of the reflation trade?

Rising equities, the second biggest rise of the year in bond yields and a falling dollar seem to suggest that it was more optimism about global growth (fuelled by continued strong PMI surveys in both Europe and the US) rather than just fear of inflation that dominated yesterday. However, these moves come…
September 23, 2021

Markets absorb Fed announcements smoothly

For a detailed analysis of the Fed’s announcements after its meeting, you can refer to the News sent last night.  Unsurprisingly, the process of reducing asset purchases should start in November. Jerome Powell said that it could end by mid-2022. The Fed has insisted that this is not a sign of a subsequent rate hike,…
September 22, 2021

Between Evergrande and the Fed, little respite for the market

The rebound in European equity markets could continue after Evergrande announced that it had reached an agreement with its creditors on the payment of interest tomorrow on a yuan loan. This seems to confirm that the Chinese authorities will “convince” the domestic creditors to rearrange the repayment terms to avoid a formal…
September 21, 2021

Evergrande fever seems to be subsiding a bit after a very turbulent day

Equity markets suffered significant losses yesterday as they were caught up in the turmoil of the collapse of China’s Evergrande property developer. US indices did recover in the latter part of the session, a trend that was confirmed in Asia overnight, except in Japan where markets were closed yesterday. The consensus…
September 20, 2021

The clouds are gathering

As the Fed meeting approaches this week, markets seem to be growing increasingly concerned. There is no shortage of worries: the pandemic remains present and continues to disrupt global production and distribution chains, which is increasing inflationary pressures, as evidenced by the acceleration of producer prices to +12% yoy in August in…
September 17, 2021

Caution grows before the Fed

The surprise rebound in US retail sales in August (+0.7% m/m), as the variant delta extended its grip on the south and centre of the country, has reintroduced a dose of uncertainty ahead of the Fed meeting next week. What if a reduction in asset purchases is formally announced as early as Wednesday?…
September 16, 2021

Sluggish US retail sales to support equity rebound?

Concerns in Asia weighed on European markets yesterday and in Asia overnight with new restrictive measures adopted by Chinese authorities against tech companies as well as concerns over a possible debt restructuring of major property developer Evergrande. Wall Street had escaped the gloom thanks to a rebound in energy stocks in…
September 15, 2021

Growth concerns rise after Chinese figures

August inflation data in the US came in slightly below expectations, but headline and core inflation remain strong at +5.3% and +4% yoy respectively. In detail, it is not so clear that a downward turn is really underway and the reaction of the markets (equities and bond yields down, USD finally…
September 14, 2021

Awaiting US inflation figures

With one week to go before the next Fed meeting, the August inflation figures for the US are of particular importance. A very slight drop is expected, but the inflation rate could be above 5% for the 4th month in a row, while core inflation has been above 4% for the last…
September 10, 2021

Unsurprising decision by the ECB

The ECB has done pretty much what was expected of it, judging by the small drop in bond yields and the stability of the euro that followed its announcements (EUR/USD @ 1.1830). It will start to reduce the additional purchases of securities decided in March, after having revised its growth and inflation…
September 9, 2021

Important ECB meeting today

Although bond yields eased a little, equity markets continued their downward correction yesterday and the trend continued in Asia.  The inflation rate in China eased to +0.8%, but producer prices continued to accelerate, which could make it difficult for the central bank to relax its measures restricting credit distribution.  The ECB meeting is the…
September 8, 2021

Slight rise in long-term bond yields

The continued rise in bond yields (1.37% for the US 10-year) reflects market nervousness ahead of tomorrow’s ECB meeting and the release of the Fed’s Beige Book this evening. At the same time, the rebound of the USD reflects both this nervousness, but also the possibility that the anticipated tightening of ECB policy will be lighter than…
September 7, 2021

Surprise rebound in Chinese foreign trade in August

European equity markets caught up yesterday while Asian markets were optimistic for unconvincing reasons: the upcoming departure of the Japanese Prime Minister would pave the way for new stimulus measures and Chinese foreign trade accelerated in August against all expectations. We must remain cautious with these statistics, which are still affected by a strong…
September 6, 2021

Job creation slows down but wages accelerate in the US

The August US employment report sent two contradictory signals: a sharp slowdown in job creation (+235k) reflecting the impact of the variant delta, but an acceleration in wages (+0.6% m/m and +4.3% yoy) highlighting the labour shortage. See our Friday’s news on this subject. Equity markets were hesitant in the US but declined in…
September 3, 2021

When the bad can be good

A new record for the equity markets in New York, stable bond yields and a falling USD: the market is calmly awaiting the August employment report in the US. The consensus is +725k, down from the last 2 months. The ADP figures suggest a much lower result, reflecting the surge in the…
September 2, 2021

Market anticipates ECB monetary tightening

Over the last two days, the German 10 year bond yield has increased by 7bp while the US 10 year is only up 3bp and turned down yesterday. This is the main reason why the EUR/USD exchange rate has risen from 1.18 to 1.1850. ECB hawks have been calling for an immediate reduction…
September 1, 2021

Euro area inflation at 10-year high

Confusion reigns in the markets: stocks are up in Asia despite fairly negative news on activity. Indeed, the China’s Caixin manufacturing PMI fell below 50 in August, as it was the case in many other countries of the region. But, as usual, this is fuelling expectations of monetary policy easing in…
August 31, 2021

Sharp decline in China’s PMIs

A bad surprise in China, where the services purchasing managers’ index (PMI) fell well below the 50 level that separates contraction and expansion in activity in August. This suggests that the impact of the containment measures put in place to stem the resurgence of the pandemic was much stronger than…
August 30, 2021

Equities up, bond yields and the USD down after Jackson Hole

The markets welcomed the Fed Chairman’s speech at the Jackson Hole symposium. He confirmed the strong likelihood that the Fed will begin to reduce its asset purchases before the end of the year, but gave no specific information on the timing and pace of this operation. The markets especially appreciated the…
August 27, 2021

Jackson Hole: here we are

Stocks are down, rates (US 10y at 1.34%) and the dollar (EUR/USD at 1.1760) are up very slightly: the market is logically playing it safe ahead of Jerome Powell’s key speech at 4pm (CET) today. Several Fed members (who are not voting on monetary policy decisions this year, however) have already…
August 26, 2021

Bond yields slightly up before Jackson Hole

US equity markets hit new highs yesterday, but futures flipped and Asian markets fell instead. The dollar is fairly stable around 1.1750, but bond yields are edging up with the US 10 year now at 1.33%. The economic reports have little impact before Jerome Powell’s speech scheduled for tomorrow in Jackson…
August 25, 2021

Markets already waiting for Jackson Hole?

US equity markets have reached new all-time highs, underlining how fundamentally optimistic they remain. But more mixed Asian markets, the slight rise in bond yields (the 10-year US Treasury is close to 1.3%) and the upward tremor of the dollar (1.1740 against the euro) seem to reflect greater caution ahead of…
August 24, 2021

Markets erase last week’s losses

Equity markets and commodity prices rebounded sharply yesterday as the dollar lost ground: the exchange rate against the euro rose to around 1.1750. The bond market is more cautious with a stable US 10-year rate just above 1.25%, before the Jackson Hole symposium at the end of the week. The…
July 30, 2021

Uncertainty fuels volatility on financial markets

Sentiment was positive yesterday but disappeared overnight with Asian equity markets down sharply and US futures down. Bond yields are edging down after a rebound and the USD has regained some ground after heavy losses (1.1880). US GDP growth figures were welcomed but concerns about the Chinese authorities’ attitude towards private companies…
July 29, 2021

Fed discusses tapering bond purchases, but remains tight-lipped on timing

The Fed statement was slightly more hawkish, as “progress” has been made towards the targets of maximum employment and price stability. In the press conference that followed the meeting, Jerome Powell acknowledged they had a deep discussion about bond tapering but said they were not there and that there was “ground to cover” to…
July 28, 2021

Nervousness before the Fed meeting

The downward correction in Asian equity markets continues and the Nasdaq has had its worst day in more than two months. Bond yields are edging down (1.23% for the US 10y) and the USD seems regaining some ground after having weakened a bit yesterday (EUR/USD above 1.18). The market is waiting for…
July 27, 2021

Has the summer break already begun?

Baring the sharp drop in Chinese equities due to the crackdown against education companies, equities have remained almost stable yesterday. Slight moves on the bond market and a very limited weakening in the USD too. To answer the question, it is not summer break yet, as there are many key…
July 26, 2021

Strong downward correction in Asian equities

Record-high level for US equities on Friday, but strong downward correction in Asia overnight, after Chinese authorities announced a broad set of reforms for private education companies “hijacked by capital”. They will be banned from making profits, raising capital or going public. These measures are coming in the wake of a…

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