Politics

Japan: Very low economic growth again owing to weak domestic demand

In Q4 2016, growth in the Japanese economy lost a little momentum. Despite greater government spending, economic growth was +1.0 percent on the prior quarter on an annualised basis, and somewhat weaker than expected. In the prior quarter the figure reported was +1.4 percent. The most recent figure is disappointing to the extent that in the wake of the government’s new fiscal package the general expectation was for stable, robust growth in the last three months of the year. It was, however, positive that for 2016 as a whole Japan did not post negative growth in any single quarter, meaning that slight progress was made in stabilising the economy. The Yen tended weaker again of late and this will no doubt have helped, as this supports Japan’s exports. Real economic growth in 2016 as a whole amounted to +1.0 percent, as we had forecast. Given the latest economic figures for…

The Netherlands: Election likely to be less Wild(ers)

On 15 March, the Dutch electorate will visit polling stations across the country to place their vote in a general election. Forming a government is likely to be a laborious task on account of the highly fragmented parliament, characterised by a large number of medium-sized parties, although this is far from a rare occurrence in the Netherlands. If we take average polling data across the past few weeks, at least five parliamentary parties will be required to form a coalition government without the inclusion of the Party for Freedom (PVV – headed up by Geert Wilders). The most likely scenario appears to be a coalition formed by Prime Minister Mark Rutte of the People’s Party for Freedom and Democracy (VVD – conservative), supplemented by various minority parties including the Christian Democratic Appeal (CDA – Christian Democrats), Democrats 66 (D66 – social-liberal), GroenLinks (GL – green) in addition to a fifth…

Political risks are becoming increasingly visible in the Euro area

The risk premiums on government bonds in several Euro-area states have increased significantly in the past few days. Italian as well as French government bonds have come under especially heavy pressure. The gap between ten-year Italian and German yields rose recently to 200 basis points and thus to the highest level since 2014. The yield spread between French and German bonds of the same maturity is now around 70 basis points – a new four-year high. The most important reason for these rising yield spreads is the perceptibly higher level of political uncertainty in these countries. Prominent here is yet again Italy, which has still not recovered politically from its failed reform of the Senate. Although early elections are not politically necessary, they are possible as of the late spring now that the Constitutional Court in Rome has ratified parts of the electoral law. The populist Five Stars Movement, which…

DAX heads for 12,500 points

Apart from the DAX the corporate profit performance of companies listed in the leading indices has been stagnating for several years. But share prices have risen nevertheless, admittedly primarily due to falling capital market yields. In the meantime, these made the upside potential for the future valuation of the equity markets look unlimited. In many cases, it was merely a question of how high the PER could rise in an environment of zero or negative interest rates and no longer of the business performance of the companies themselves. Market players are now likely to gradually turn their back on this view. After all, capital market yields have already been rising for some time now in the largest debtor market: for the first time in several years the valuation of US equity markets has risen significantly while yields have also increased considerably at the same time. For investors in shares this…

A Changing World

In 2007 a long-lived economic upswing came to an end. This upswing was marked by a strong increase in world trade and was driven by significant productivity growth. This combination resulted in an inflation rate that remained relatively low for several years flanked by simultaneously high global growth rates of around 5%. During this phase bond yields also continued the downtrend they had been charting for many years – this was the “Goldilocks scenario.” In this period questions about the distribution of wealth within society were largely irrelevant and were not discussed – admittedly also because property prices in some countries led to illusions of affluence and excessive debt during this time. But increasing world trade led to gradual but ultimately pronounced shifts in the levels of affluence between countries and social groups. The emerging markets benefited very greatly from globalisation whereas in the industrialised countries many groups of workers…

Greater growth momentum provides more scope for political field studies

The leading indicators of the emerging markets imply that growth momentum has already been picking up slightly in the last few months. This positive development is probably due for the most part to the higher price of oil. Growth momentum is now accelerating in the industrial nations too, supported by the more favourable development in the emerging markets. The greater growth momentum comes at exactly the right time. The last few days were marked by rapidly increasing political uncertainty, which could quickly have negative implications for sentiment among corporates and therefore further weaken the willingness to invest. These potential negative effects for the economy should be offset initially by the robust fundamental development. The latest robust economic development should therefore broaden the scope for political field studies. However, there are limits here too. Overwhelming uncertainty would have a negative effect on economic growth and therefore contribute overall to a slowdown…

1 45 46 47 56