UBS | We have been saying that rising downward pressure in the economy and pain in the corporate sector will drive faster SOE restructuring and closin g of excess capacities. Today’s State Council meeting confirms our prediction. For the first time, the government has publically given a timetable and specific guidelines on cleaning up “zombie companies” and reducing losses at the SOE sector.
Together with growth forecasts for the EU, ranging from 1.9% to 2% in 2016 and rising to 2.1% in 2017, the European Comission recently mentioned in its annual growth survey the possibility of making the Stability Pact more flexible. They also highlighted the main macro imbalances of each member state.
BARCLAYS | Argentina’s incoming finance minister, Alfonso Prat-Gay, has made some important statements about short-term economic policies. We think that his comments are steps in the right direction and indicate pragmatism, in that they seek a solution to economic problems while addressing restrictions imposed by social, political, and economic realities.
Germany will not accept a Common Deposit Guarantee Fund being set up in Europe until the risk associated with the banks’ balance sheets is reduced.
UBS | With a rise in the Fed funds rate looking imminent, and given last week’s ECB QE extension, ascertaining how diverging interest rate policies could impact bank fundamentals will be key to helping investors identify winners and losers among global banks in 2016.
On November 30, the 21st Conference of Parties (COP21) started in Paris. After almost 20 years of climate talks, it is hoped that the international community will finally agree concerted action to tackle climate change. A good COP21 will mean that the Sustainable Development Goals are taken more seriously.
UBS | Last week’s 168th ordinary OPEC meeting in Vienna concluded without the group agreeing on any meaningful change in strategy. Contrary to an earlier wire report that the group was to lift its target outp ut ceiling to 31.5Mb/d the defining feature of the official release was the lack of any explicit reference to either the quota or to actual production.
James Alexander via Historinhas | While we firmly believe NGDP expectations are the best guide to monetary policy we are still some way from having a proper market measure of those expectations. However, two of the peripheral countries, Spain and Italy have now produced their first estimate of NGDP for 3Q.
Marc Chandler via Caixin | It is official. The yuan will be included in the International Monetary Fund’s special drawing rights (SDR). The 10.4 percent share is a bit more than I expected, but less than the 14 to 16 percent the IMF’s staff intimated a few months ago. This is a significant event, even if there is no short-term market opportunity.