MADRID | By Francisco López | Investors are closely looking economists’ forecasts about the next rate hike in the United States. Until recently, the vast majority opted for movements in the second part of 2015. Now, after the last job creation data, some analysts believe that the rise could come as early as 1Q15.
MADRID | By The Corner | Corporate earnings season (2Q14) is about to start in Wall Street, with Alcoa opening the way and with the major American market indexes –Dow Jones and S&P 500- at maximum levels. The macroeconomic perspectives of the country will also help, especially after having overcome the impact of the weather on the GDP, as well as the certainty that the Western central banks are committed to support the economic recovery. Thus, investors expect that the official interest rates will keep at very low levels in relative historical terms for a long period of time.
LONDON| By Stephane Deo and Ramin Nakisa at UBS | At the time of writing, the Treasury curve is telling the potential US GDP growth rate is very low – in the neighbourhood of 1%. The 30-year real yield is at 1.09% (but dipped below 1% recently), the 10-year real yield is at a frightening 0.36%, and the 5-year-in-5-year yield, a good proxy of where the market thinks long-term growth will settle, is at 1.05% (but also dipped below 1% recently).Taking those numbers at face value, we would have to conclude that the current recovery is doomed, and that growth will level off soon at a very disappointing level.
MADRID | By J.P. Marín Arrese | Markets are discounting an easing in European monetary policy in the forthcoming days. Yet, the mood in the ECB is far from cheerful. It feels being dragged into action by political constraints.
LONDON | By Barclays analysts | 2014 was supposed to be different. After three years of disappointment, this was meant to be the year when the global economy had a broader, higher and more persistently solid level of growth – at least, this was the consensus narrative. In the end, the seasonally adjusted quarterly rate of global growth in Q1 was among the weakest of the recovery. US growth was near zero (probably negative after revisions) and China’s GDP growth was below already low forecasts.
LONDON | By Aroop Chatterjee at Barclays | Implied volatilities in a number of asset markets have been recently trading close to their lowest levels since 2007. This has happened despite prevailing uncertainties about the durability of US economic growth or the path of Fed policy.
WASHINGTON | By Pablo Pardo | We are, again, in the midst of an earnings season. But, should we call it ‘earning season’ or ‘earnings exceed the forecast session’? Because companies tend to earn more than they expected, and also more than the markets’ forecast. Another nail in the coffin of the Efficient Market Hypothesis?
WASHINGTON | By Pablo Pardo | Robert Schiller has always been an advocate of a moderate government intervention in financial markets. He also criticised the Federal Reserve’s Quantitative Easing (QE) because he considered that asset prices are not among the areas of central banks. However, political reality seems to go in the opposite direction of the new Nobel winner.
MADRID | By Luis Arroyo |The clock is ticking: if Congress can’t agree to budget terms, parts of the federal government will shut down by Monday midnight. But markets have reacted differently than expected to this political pulse between Democrats and Republicans.
Iris Mir | China starts a new round of economic experimentation. Shanghai is set to become the new engine of growth with a China’s first Free Trade Zone (FTZ). The goal is to attract foreign investment by testing new deregulation rules that should give foreign companies greater flexibility. But urgent reforms in other areas are a must in order to transform the rise of the income of Chinese households into real purchasing power.