JP Marín-Arrese | Christine Lagarde’s nomination ensures the ECB will fully preserve Draghi’s heritage. It will certainly deliver a substantive loosening in monetary policy over the coming months. Everyone expects the first move to materialise this week, probably a rate cut. Anything short of a clear message in the coming press conference would deeply disappoint the markets. Whatever happens next Thursday, more robust action will materialise before the year close.
Chris Iggo (AXA IM) | Navigating through all the noise out there, it seems the most sensible expectation that investors should have is described by “lower rates but no recession”. Central banks were more dovish again this week and the Fed looks as though it is ready to meet markets expectations on cutting rates. There are risks to growth from a range of things, but we shouldn’t underestimate the power of the easier monetary policy message.
BoAML | A combination of weaker growth and low inflation is driving an ongoing monetary easing. So far this year, nine out of the 35 central banks we actively cover have cut rates and only three have raised rates. Over the rest of the year, we expect cuts by 14 central banks,
Intermoney | In 2018, the number of foreign direct investment (FDI) projects completed in the Old Continent (according to a survey by EY) fell by 4%, even if the falls were greater in the UK and Germany where the fall was about 13% compared to stability in France. However, the countries with the biggest falls were Italy (-63%) and Ireland (-52%).
Renta4 | Markets have advanced much in little time, with advances of 20% in Europe and 25% in the US in the last four months. This strong performance has been produced in an environment of clearly accommodative central banks, although the market “seeks” even more, discounting interest rate cuts both in the US (probability 50%) and in the Eurozone although to a lesser degree (probability 20%). At the same time, dissension is emerging in the heart of the ECB about the deposit rate
Andrea Iannelli (Fidelity) | Central banks have again become the protagonists in the quarter which has just ended. A generalised movement towards more expansionary positions, with the Federal Reserve in the lead, supported risk tolerance and lifting all kinds of assets, reversing the poor returns registered in 2018.
After a period of gloomy macro data, market watchers are starting to see the light. According to Allianz research, the share of “bulls” has increasedfrom around 30% at the start of the year to currently 54% net. At the same time, the volatility index is some 20% below its historical average, in spite of the much greater uncertainty facing the world economy.
Some challenges that markets will face in 2019 are not new in the picture: global debt, trade tensions between the US and China, and the sensitive situation in some European countries. We asked some of the best Spanish analysts about their forecast and this is what they said.
Neil Dwane (Allianz) | The response of central banks to the financial crisis 10 years ago may have saved the world from a devastating depression, but it also created a host of unforeseen effects – from more indebtedness to more economic inequality. Looking back at what we got right – and what went wrong – what lessons can we take away for the future?
Multiple rounds of quantitative easing and liquidity injections resulted in more than a four-fold increase in the aggregate G4 central banks balance sheet in the last decade. This experience has many worried about a “quantitative tightening ” trade. Here analysts at BoAML argue that those worries can be put off for another day.