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.
Does central banks’ “communication” matter? Some analysts believe it does. Therefore, Draghi may now have to work to repair his reputation as “Super Mario”.
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.
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.
The election of Mauricio Macri, the candidate for the Cambiemos (Let’s Change) coalition, as president has been welcomed as a potential turning point in Argentina’s financial, political and foreign policy outlooks. The country’s economic performance has been overshadowed by high inflation and isolation from global capital markets, and planned reforms will likely boost its exports and could accelerate investment in areas such as infrastructure and the nascent shale gas sector.
Huo Kan and Wu Hongyuran via Caixin | China’s banks are successfully managing 1.92 trillion yuan worth of non-performing loans, but tomorrow could bring a flood of bad debt.
BARCLAYS | We believe a further expansion in ECB QE will only have regional, and overall limited , effects on EM. Extending the discussion to the effect of BoJ QE, we come to similar conclusions.
Banks have made a massive effort to increase their solvency by sharply reducing risk exposure and boosting their own resources. They face rough times ahead as plummeting interest rates and profits leave them little room for comfort. Some big players, such as Deutsche Bank, have suffered huge losses while others struggle to keep pace faced with an adverse outlook.
BARCLAYS | In our view, achieving the FOMC’s target of 2% PCE inflation may require a substantial undershoot on the unemployment rate ( to 4% if not below ). Should the unemployment rate remain near current levels or should inflation expectations drift lower, the FOMC would be unlikely to hit its inflation target over the foreseeable future.