We stick with the coronavirus theme in our first Exclusive. Top macro thinker, Dominique Dwor-Frecuat, gives her take on the channels through which a pandemic could hit growth and the countries most exposed.
In our second Exclusive, former Deutsche Bank economist, Caroline Grady, drills down into Europe’s economic fragilities and how the coronavirus could bring an end to what is currently meagre growth. Next up, I take a look at Mike Bloomberg’s dwindling prospects in achieving the Democratic presidential nomination after his lacklustre performance in yesterday’s TV debate.
We also feature Part 3 of our series on gold from commodities expert John Butler. In this final instalment he explores the demand function for gold and reconciles this with his two earlier frameworks on valuation and fair value. Finally, we include leading Turkey economist Haluk Burumcekci’s preview on Wednesday’s CBRT meeting. It’s still well worth a read with the central bank overdelivering on rate cuts.
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We stick with the coronavirus theme in our first Exclusive. Top macro thinker, Dominique Dwor-Frecuat, gives her take on the channels through which a pandemic could hit growth and the countries most exposed.
In our second Exclusive, former Deutsche Bank economist, Caroline Grady, drills down into Europe’s economic fragilities and how the coronavirus could bring an end to what is currently meagre growth. Next up, I take a look at Mike Bloomberg’s dwindling prospects in achieving the Democratic presidential nomination after his lacklustre performance in yesterday’s TV debate.
We also feature Part 3 of our series on gold from commodities expert John Butler. In this final instalment he explores the demand function for gold and reconciles this with his two earlier frameworks on valuation and fair value. Finally, we include leading Turkey economist Haluk Burumcekci’s preview on Wednesday’s CBRT meeting. It’s still well worth a read with the central bank overdelivering on rate cuts.
Enjoy!
Bilal
The Long-Term Consequences Of A COVID-19 Global Pandemic (3 min read) A global COVID-19 pandemic would further accelerate the post-financial crisis deglobalization. China’s long-term growth rate could be hit the hardest, the US the least.
Three key factors could drive the long-term impact of a COVID-19 pandemic on global growth:
• Further reversal of globalization as corporations reassessed their supply chains. This would translate into a further decline in global trade and foreign direct investment (FDI).
• The exposure of underlying financial fragility, which could have a lasting impact on growth (Chart 2).
• Impacted political stability and policymaking capacity.
(Dominique Dwor-Frecaut | 20th February, 2020)
Can Europe’s Fragile Economy Withstand Another Shock? (4 min read) The European economy is grinding to a halt. Fourth quarter GDP growth slowed to the lowest for almost seven years, and supply-side disruption from the coronavirus and new regulations in the auto sector will compound the weakness.
We expect activity to slow further before any sustained rebound sets in. Meaningful fiscal stimulus appears unforthcoming, and further support from monetary policy will be limited given policy is already close to extremes.
Consumer spending, the mainstay of the economy, can only do so much to fend off a difficult external environment and the disruptive structural change in autos.
(Caroline Grady | 20th February, 2020)
What Happened To Mike Bloomberg? (2 min read) Investors love him, polls were surging in his favour, and his ad spending was off the charts. Yet, by all accounts, Democratic presidential hopeful Mike Bloomberg didn’t impress in his first debate yesterday. While we do not have polling data, betting markets have made their judgement, seeing his odds of winning the Democratic nomination falling from 33% to 20%. Meanwhile, the odds of Bernie Sanders winning continues to rise (Chart 1) – we discussed his policy platform in an earlier note.
(Bilal Hafeez | 20th February, 2020)
Gold: A Modern Investment Framework For An Ancient Asset, Part III (5 min read) In Part I of this series I derived a valuation framework for gold as a proven form of ‘insurance’ against potential losses in a portfolio of financial assets, and the currencies in which they are denominated. In Part II, I described a fair-value framework for modelling the price of gold. While the former approach implies that gold is significantly undervalued at present, the latter implies it is close to fair value. In this final part, I reconcile these two approaches by exploring the demand function for gold, and how it compares with that for money itself.
(John Butler | 20th February, 2020)
CBRT Credibility On The Line (3 min read) With the lira under pressure expectations are mixed on whether the Turkish central bank will opt for a sixth consecutive interest rate cut on Wednesday. We expect no change from the current 11.25%.
Inflation Continues to Edge Back Up
Turkey’s Central Bank (CBRT) is once again at a crossroads. After 1275bps in rate cuts since July last year the lira is under pressure and the focus on the true level of reserves has intensified.
State banks have conducted regular foreign exchange sales in recent weeks, yet the lira has weakened 2% in the last month. Total open FX positions of the state banks reached US$4.8bn for the week ending February 7, its highest for a long time, with US$2.8bn additional positions opened, according to BRSA data.
(Haluk Burumcekci│18th February, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)