Stock markets

British economy still unimpressed by Brexit vote in the fourth quarter

Is the British economy so resilient that it can “swallow” the Brexit shock without suffering any major impairment? One could well arrive at such a conclusion looking at the robust economic trend in Great Britain in the months since the referendum. In the fourth quarter of last year the pace of economic growth continued largely unabated. As the Office for National Statistics reported this morning, gross domestic product recently increased, as during the summer months, by 0.6 percent quarter-on-quarter. With last year’s growth rate of 2 percent the United Kingdom even took the lead among the G7 states as regards growth. These growth figures are “grist to the mill” of Brexit proponents, above all for those who are in favour of a “hard” break with the EU: against this background, the warnings about Brexit’s negative economic effects look like mere scare-mongering. Consumer-focused services made a particularly strong showing in the…

ECB WOULD DO BETTER TO CHANGE ITS KEY INTEREST RATE POLICY SOONER THAN LATER

In July 2012, the European Central Bank (ECB) lowered its deposit rate to zero, and some two years later it became negative for the first time at minus 0.1%. Since then, commercial banks in the eurozone have had to pay „penalty interest“ on surplus liquidity parked at their central bank. Only three months later, in September 2014, the ECB lowered the deposit rate once more to minus 0.2% and then again in December 2015 to minus 0.3% and finally in March 2016 to minus 0.4%. In March of last year, the main refinancing rate was also lowered to zero which meant that the commercial banks in the eurozone were now able to obtain the required central bank liquidity in normal tender operations without having to pay interest on this. Since then at the latest, money market rates and a considerable share of capital market yields in the euro area have…

Turning point for President Trump

Following three years of stagnation, profits in corporate America are on the rise again – we expect a 12% profit increase for both 2017 and 2018  The “Trump rally” is well underway. The S&P 500 has increased by 8% since polling day in November (DAX: +11%). This rally has been sustained by the recovery in values recorded in the financial, energy and industrial sectors. Here, fundamental data has improved significantly, so that the increase seems justified at the moment. In this way, (U.S.) financial figures are benefitting from substantial yield rises in the USA (+60 basis points for 10Y U.S. Treasury bonds since November), while energy bonds are also returning higher profits thanks to the sharp rise in the price of oil (+25% since Trump’s election win). Given that business is continuing to run smoothly in the third key U.S. sector (technology), Trump’s inauguration is set to coincide with significant…

Private households: Year-end rally saves 2016 as an investment year – environment will remain difficult in 2017

According to our preliminary calculations, the volume of monetary assets held by German households probably increased last year by EUR 230 bn to EUR 5.7 trillion. At 4.1 per cent this increase was only slightly smaller than that recorded in the previous year. Share price increases supported the trend: the DAX rose strongly in the year-end rally and ended up 6.9 per cent higher. Although German investors pay less heed to shares, equity-based mutual funds and certificates than investors in other countries, share price gains still contributed around EUR 44 bn to asset growth. Besides this, it was mainly the Germans’ ongoing thrift that was responsible for the asset growth: supported by good income growth, the saving rate probably increased from 9.7 to 9.8 per cent in 2016. Even though the poor interest rate environment is not putting Germans off saving, the extremely low interest rates are nevertheless having a…

Austria: President Van der Bellen

Relatively clear electoral victory for the Green candidate in Austria– surveys show that the FPÖ remains the strongest force ahead of the National Council elections Austria has elected a new President: the winner is Alexander Van der Bellen. After the election was declared invalid in May due to various procedural irregularities and the date set for September was postponed when faulty postal voting ballot papers were discovered, the current status provides no grounds for contest so that the result can be deemed final – an objection can however be lodged up to 22 December. The election of the independent Green Party-backed candidate to the Vienna Hofburg has put a slight damper on the recent wave of victory enjoyed by the populist parties. According to projections made by the ORF – the postal votes will be counted in the course of today – Van der Bellen received 53.3% of the votes….

A fateful vote in Italy – regression or progress

This year has already seen some fateful votes with surprising outcomes. The British decided in favour of Brexit and the USA for the experiment Trump. In a few days Italy is also facing such a fateful vote. And here, too, the country is deeply divided. A lot is at stake: Can Italy finally become governable? On 4 December Italians are to vote on Prime Minister Renzi’s planned constitutional reform. The purpose of this reform is to make it easier to govern the country: at the moment, every law has to get through three readings in both chambers of parliament – the Chamber of Deputies and the Senate. Since in the past a government has seldom been able to rely on a majority in both chambers, proposed legislation has frequently been blocked or diluted. This perfect bicameralism has made it incomparably hard to govern Italy and has ultimately led to frequent…

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