Emerging Markets

Path clear for a referendum on constitutional reform in Turkey

The Turkish lira started 2017 in exceptionally weak form and, with a loss of a good 9% against the euro, revealed the weakest performance of all the world’s major currencies. The lira is currently marking historic lows against both the euro and the US dollar. The prospect of the American Federal Reserve tightening its policy did not exactly help the Turkish currency either. However, the present weakness is currently being driven primarily by domestic factors. Not only is President Erdogan adopting a heavy-handed approach to dealing with his political opponents since last summer’s attempted coup, but governance measures, the uncertainty accompanying these as well as conflicts with radical groups regularly flaring up within Turkey have now left a visible mark. This extends both to the country’s economic performance as well as to its economic prospects. The central bank is also a part of this, having until now only reluctantly adopted…

Brisk consumer spending drives robust growth in Germany in 2016

In 2016, the German economy continued on its robust growth track. With a real increase of 1.9 percent, the economic output actually scored the strongest growth since 2011. Private consumer spending and public consumption expenditure rose appreciably, as they had in 2015, laying the basis for macroeconomic growth. Private households’ zest for consumer spending was supported again in 2016 first and foremost by favourable labour market trends. Gainful employment climbed sharply, and is now at a new record, while at the same time the unemployment rate in 2016 fell to a new low. As a result, as in recent years employees’ income surged. In real terms, private consumer spending in 2016 rose +2.0 percent and thus as strongly as in 2015. In this context, in the past year two “one-time effects” helped boost private consumer spending and public consumption expenditure. The low price of oil braked energy prices and the…

Trend reversal on the horizon for emerging markets – positive effect for developed countries

The global economy simply does not want to swing into motion; global trade is stagnating. The central banks are doing what they can to support economic development. Calls are now growing loud for governments to push start the economy through higher public spending. However, in the absence of any perceptible economic recovery in the large emerging markets, the successes of these measures will be short lived. In spite of this, a trend turnaround is slowly emerging in these countries, which should improve the global economic outlook. Economic development in most of the big emerging markets has been anything else but positive in the last two years. The crisis in for example Brazil, Russia and South Africa took its toll on the glowing reputation of the „growth markets“. Even China, which has been the driver of global growth for a long time now, cannot avoid the trend towards consistently lower overall…

FOMC – not much concrete information

Short-term economic risks have diminished The Open Market Committee of the Fed left its key interest rates unchanged yesterday evening. The accompanying press statement provided no concrete indications as to the possible timing of the next interest rate adjustment. However, the current economic assessment is significantly more positive than in the previous statement. The Fed states that short-term risks for the US economy have diminished. The evaluation of the situation of the labour market also sounds significantly more positive. Various indicators suggest that capacity utilisation in the labour market has increased. Consumer spending is reported to be robust and economic growth has improved. At the same time, the text passage stating that the Fed is closely monitoring the global situation was left unchanged. This could be understood as an indication that the Brexit consequences for global economic growth and for the US economy are not yet foreseeable and that in…

Little ice age almost over at the end of June

Still a disadvantageous risk-reward profile in the equity market for the time being / Delay investment decisions until after 23 June Since the beginning of March the DAX has moved as sluggishly and as sparingly as a bear in winter. The trading range of the German benchmark index was mainly between 9,500 and 10,300 points. The reporting season is over, there is no relevant company news. Only very few investors dare leave cover in view of an imminent Brexit, even though the severe negative factors of the recent past (falling demand from China and the emerging markets, fluctuating currency exchange rates, a collapse in the oil price) have been factored in and a trend towards recovery is visible. The good news is that from the second quarter onwards company reports will be better again. However, earnings growth is only likely to improve at a modest rate, and the above average…

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