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The MSCI Emerging Markets Index has returned nearly 3% in local currency terms since this time last month. At least three factors may explain why emerging market equities have been on the mend. First, investors’ fears of a hard landing in China may have …
8th April 2014
There are good reasons to be cautious on the near-term prospects for the Nikkei, but we expect equities in Japan to outperform those in other major developed markets over the rest of the year. … Better second half in store for the …
This report is only available as a PDF. Click to download. … Is a bubble emerging in US corporate bonds? …
This report is only available as a PDF. Click to download. … Fed still on course for gradual taper …
7th April 2014
At around 170bp, the spread over Treasuries of US corporate bonds with a 7-10 year maturity and BBB rating is now less than its average of the last quarter of a century and the smallest since before the financial crisis. It is probably premature to talk …
This report is only available as a PDF. Click to download. … Revisiting US Treasury and German Bund decoupling Capital …
4th April 2014
The credit spreads of US corporate bonds fell further in March. At around 1.7%, the spread over Treasuries of those with a 7-10 year maturity and BBB rating is now below its average of the last quarter of a century and the smallest since before the …
This report is only available as a PDF. Click to download. … Planned Greek debt issuance is not a game changer …
3rd April 2014
The Australian dollar has been one of this year’s best performing major currencies. But given the outlook for monetary policy and the prices of some of Australia’s major exports, we think that it will fall against the US dollar this year and next. … Is …
2nd April 2014
This report is only available as a PDF. Click to download. … Is the Australian dollar set to fall? …
The “stripped spread” over US Treasuries of the JP Morgan EMBI Global Latin America Index fell by 30bp in March, bringing its decline since the start of February to almost a full percentage point. Although the spread remains larger than those for the …
1st April 2014
This report is only available as a PDF. Click to download. … Too soon to sound the "all clear" on Ukraine …
The spread between the yields of 10-year US and German government bonds is close to the largest it has been since the start of EMU. But we think the spread will continue to grow. With this in mind, we have lowered our end-2014 and end-2015 forecasts for …
31st March 2014
This report is only available as a PDF. Click to download. … Wedge between US & German bond yields likely to grow …
This report is only available as a PDF. Click to download. … Will foreigners' enthusiasm for Spanish government debt wane? …
28th March 2014
At first sight, many of our views now look close to the consensus. However, this is typically because other analysts have swung round to our long-held positions, which have mostly been proved right, rather than because we have shifted. What’s more, even …
27th March 2014
The reach of Corporate America has become increasingly global. One important consequence has been a secular rise in profitability, not only at US multinational companies (MNCs) which dominate the major stock markets, but also at firms which operate solely …
This report is only available as a PDF. Click to download. … Internationalisation of Corporate America justifies higher margins …
Balance of payments data suggest that capital inflows from abroad may have helped to push up the value of the euro. But if the current account surplus shrinks and the appetite for euro-zone financial assets wanes, the euro may come under renewed pressure …
26th March 2014
This report is only available as a PDF. Click to download. … Do capital inflows explain the euro's strength? …
Net selling of emerging market assets by global ETFs and mutual funds was almost as heavy in February as it was in January according to EPFR Global. The crisis in Ukraine, growing concerns about the health of China’s economy, and the US Fed’s shift …
25th March 2014
This report is only available as a PDF. Click to download. … Emerging Asia equities likely to stop underperforming soon …
The euro has been on an upward trend against the US dollar for nearly two years, largely reflecting improving sentiment towards the euro-zone economy and reduced fears of break-up. But the relative valuation of euro-zone assets has become less appealing …
24th March 2014
This report is only available as a PDF. Click to download. … Rally in US dollar to be extended …
The crisis in Ukraine still has the potential to have a significant impact on the European economy and global financial markets. Nonetheless, the most likely outcome appears to be a limited exchange of sanctions and a diplomatic settlement that sees the …
21st March 2014
This report is only available as a PDF. Click to download. … Fed still in no rush to tighten policy …
The adverse market reaction to the slightly more hawkish tone of comments from the Fed yesterday looks justified to us. Indeed, market expectations for US interest rates are likely to rise further, putting additional upward pressure on Treasury yields and …
20th March 2014
This report is only available as a PDF. Click to download. … Scope for UK Gilts to outperform US Treasuries …
This report is only available as a PDF. Click to download. … Are bond investors too complacent about the outlook for Fed policy? …
19th March 2014
It is tempting to conclude that the New Zealand dollar is set to fall sharply. After all, on several measures, it is the most overvalued of the G10 currencies. But with the key driver behind the currency’s strength still in place, the kiwi should remain …
18th March 2014
This report is only available as a PDF. Click to download. … Muted reaction to Crimea vote, but significant risks remain …
The real effective exchange (REER) rate of the New Zealand dollar is around 20% higher than its average over the past ten years. But we are forecasting only a small depreciation in the kiwi, even as the US Fed becomes less accommodative, because a key …
17th March 2014
This report is only available as a PDF. Click to download. … Ukraine crisis still has potential to rattle markets further …
Given the twin threats from worries about a “hard landing” in China and the crisis in Ukraine, it is perhaps surprising that global equities have not already fallen more than they have. We think that markets would be right to be sanguine about China’s …
14th March 2014
This report is only available as a PDF. Click to download. … World as a whole should benefit from slower growth in China …
This report is only available as a PDF. Click to download. … Both yen and gold retain safe-haven status …
13th March 2014
Despite the crisis in Ukraine, which has hit some currencies and assets in Emerging Europe hard, there are signs that investors are rediscovering an appetite for investing in selected emerging markets. For example, the total return from the MSCI Emerging …
12th March 2014
The continued recovery in the price of gold confirms that it has retained its safe-haven status despite the slump in the first half of last year. We expect further gains. Less positively, yen strength due to repatriation flows remains a significant …
This report is only available as a PDF. Click to download. … Slide in copper and iron prices likely to continue …
The risks of deflation in the euro-zone, particularly in light of the ECB’s continued inaction last Thursday, should keep the yields on ten-year core euro-zone government bonds well below those on US Treasuries for at least the next couple of years. … …
11th March 2014
This report is only available as a PDF. Click to download. … Emerging Asia equities back in favour …
This report is only available as a PDF. Click to download. … US Employment Report should ensure more Fed tapering in March …
10th March 2014
This report is only available as a PDF. Click to download. … What are the relative prospects for euro-zone and US bonds? …
7th March 2014
10-year government bond yields in Italy and Spain continued to decline in February. Admittedly, yield spreads over 10-year German Bunds seem reasonable given the countries’ current sovereign credit ratings. But we think there are four reasons why spreads …
6th March 2014
On the face of it, “phase two” of the Monetary Policy Committee’s (MPC’s) forward guidance appears to have been a success. After all, yields have fallen since it was introduced. But upon closer inspection, the Committee’s communications strategy still …
This report is only available as a PDF. Click to download. … West should win any financial war with Russia …
If the crisis in Ukraine escalates further, the West seems more likely to impose limited financial sanctions against Russia than to target trade in goods, especially energy. Some Russian officials have flagged up the risk that Russian borrowers might then …
5th March 2014
This report is only available as a PDF. Click to download. … Ukraine crisis to have limited impact on energy prices …
This report is only available as a PDF. Click to download. … Fallout from Ukraine rattles global markets …
4th March 2014
The crisis in Ukraine has the potential to have a further significant and prolonged impact on global financial markets, even though our current judgement is that the fallout is likely to be short-lived. Europe is heavily dependent on supplies of Russian …
3rd March 2014
