Julius Baer Research| Thanks to significant fiscal support measures, China was able to keep its annual growth rate stable at 6.7% and even accelerate its quarterly expansion rate from 1.2% to 1.8% in Q2 2016. China has several options to manage the expected slowdown ahead: fiscal spending, interest-rate cuts and renminbi devaluation will be able to limit the cyclical risks ahead.
AXA IM | Companies have re-leveraged their balance sheets since the global financial crisis (GFC), driven by low borrowing costs. Although heightened, corporate leverage is not currently excessive in developed markets, although we see signs of concern in emerging markets. In this note we assess whether we should be concerned about corporate leverage at current levels.
The precipitous drop in oil prices in particular has forced rentier states, which were able to count on massive energy profits to fund generous state largesse up until a few years ago, to diversify their economic relationships with Europe and the rest of the world. These profits allowed states like Saudi Arabia and Iran to get by with incredibly inefficient economies, which officials in both countries are now actively restructuring in order to stimulate real growth and attract international business.
Zhu Haibin via Caixin | High savings rates, a longtime hallmark of China’s economy, have helped the country retain its financial stability despite rapid economic growth. But China’s aging population is cutting into savings rates, and the effect on China’s economy and financial sector could prove disastrous.
Zhong Zhengsheng | The yuan has depreciated further against the U.S. dollar recently, with the central parity rate on July 6 hitting the lowest level since November 2010, at 6.68 yuan for every dollar.
America is slowly coming to the climax of its painfully long presidential election process. As usual, there is much talk about choices and little talk about the process for deciding which choices to make. The present election cycle is culminating in a choice between two candidates with a lot of negative baggage.
BoAML | Moving into 3Q16, we are updating the price deck for the mined commodities. Given the various shocks to the global economy and keeping in mind that uncertainty remains high, we have become slightly more cautious on the base metals.
Yu Hairong via Caixin | A slowdown in private investment in China, fueling fears that the country’s growth could be weaker in the coming months, has policymakers scurrying to find solutions.
BoAML | Global coal prices rallied strongly since March on rising crude oil prices and Chinese production cuts. Front month coal prices in Newcastle rose by $5 to $50/mt, outpaced by a staggering $17 rise in 12-month forward prices to $58/mt. How did this happen? Higher oil prices pushed the global coal cost curve up by about $5/mt, on our estimates, explaining about 30% of the rally in coal forward prices.
J.L.M. Campuzano (AEB) | Little by little the markets are stabilising. Liquidity is improving and trading volumes are normalising (although they are still low…what is normal?)