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Gavekal Research
Nick Andrews, Cedric Gemehl
Aug 04th 2021
The European Rotation
As Europe returns towards something approaching normality, the eurozone is undergoing a rotation in economic leadership from goods to services.
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Gavekal Research
Louis Gave
Aug 03rd 2021
Is The Reflationary Trade Back On?
Forget the recent easing signals sent by the Chinese Politburo (and consequent drop in Chinese bond yields). Forget fears about the “Delta variant” giving Western central banks cover to keep extremely loose monetary policies even as inflation rises. Forget also the upcoming US stimulus bill, or the unleashing of European fiscal expansion. A positive signal that no one is yet talking about is the deflationary signal that could have materialized,...
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Gavekal Research
Research Team
Aug 03rd 2021
Strategy Monthly: The Global Monetary Divergence
As the world’s three big economies—the US, the eurozone and China—recover at different speeds from the shock of Covid, their monetary policy paths are diverging. This divergence will have major implications for bond investors and foreign exchange markets.
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Gavekal Research
Cedric Gemehl
Jul 30th 2021
Breaking Down European Inflation
Two weeks ago, after US consumer price data for June showed inflation had climbed to a 13-year high of 5.4%, my colleague Tan Kai Xian examined the three main drivers of this year’s rise in US inflation: base effects, supply-side constraints and demand-pull factors. He concluded that base effects have started to wear off and supply-side constraints will soon begin to ease. However, demand-pull factors are set to strengthen over the coming...
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Gavekal Research
Anatole Kaletsky, Cedric Gemehl, Nick Andrews
Jul 30th 2021
Webinar: Europe Caught Between Stools
The US has taken an approach to the pandemic that involves reopening and “living with Covid”, whereas most East Asian economies are heading down the "zero-Covid" path. Europe seems to be caught between these two stools. Which way Europe turns could have a big impact on global growth, the value of the euro and key asset values.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Jul 26th 2021
A Glass Less Full
The eurozone’s economy has continued to pick up in July, with the flash composite PMI released on Friday beating expectations to hit a 21-year high. The manufacturing component continued to fire strongly, and notably the services index topped 60 for the first time since May 2006 as governments relaxed Covid restrictions and the summer tourist season got under way. However, after nine months in which eurozone data has consistently come in ahead...
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Gavekal Research
Cedric Gemehl
Jul 23rd 2021
Low For Even Longer
On Thursday, the European Central Bank’s decisionmakers sat down for their first monetary policy meeting since they ditched their longstanding inflation target of “below, but close to 2%” in favor of a new symmetrical target centered on 2%. That decision formalized the ECB’s shift away from its Bundesbank-style focus on price stability and enshrined its role as the guardian of eurozone financial stability.
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Gavekal Research
Will Denyer, Nick Andrews, Wei He, Vincent Tsui
Jul 23rd 2021
Webinar: The State Of Global Growth
The reflation trade has ebbed in recent weeks as investors have gotten more comfortable with the trajectory of US monetary policy and concerns have risen over the Delta variant of Covid disrupting economic opening. At the same time, China continues to crack down on its high-growth internet sector. Our team assessed the market implications of these trends.
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Gavekal Research
Michael Clendenin, Ernan Cui, Thomas Gatley
Jul 16th 2021
Webinar: What's Behind China's Internet Crackdown?
China's authorities have aggressively tightened regulation of the formerly free-wheeling internet sector. In this webinar, Gavekal RedTech principal Michael Clendenin joined Gavekal Dragonomics's Ernan Cui and Thomas Gatley to analyze the government's motives in the ever-widening crackdown, forecast the next regulatory moves and explain how investors can navigate the risks.
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Gavekal Research
Wei He, Rosealea Yao, Thomas Gatley
Jul 09th 2021
Webinar: China's Conflicting Pressures In The Second Half
China is entering the second half of 2021 with its strong post-Covid economic momentum still intact, despite policymakers staying consistently hawkish on debt and property. In this webinar Wei He, Rosealea Yao and Thomas Gatley outlined how these conflicting pressures will play out over the rest of the year, and discussed the potential for an easing of the policy stance.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Jul 09th 2021
Bye-Bye Buba
The European Central Bank on Thursday jettisoned its longstanding inflation target of “below, but close to 2%” in favor of a symmetrical target centered around the 2% mark. The formal adoption of a symmetrical target is significant, because it acknowledges just how far the ECB has traveled from its origins as the institutional offspring of the Deutsche Bundesbank.
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Gavekal Research
Cedric Gemehl
Jul 08th 2021
Not Quite A Wage-Price Spiral
European companies are hiring again—or at least they would be if they could get the staff. The rebound in eurozone economic activity has fueled employers’ demand for labor. Having languished at about one standard deviation below its long term average through 4Q20 and 1Q21, the European Commission’s index of eurozone businesses’ hiring intentions has risen to over one standard deviation above its long-term average, as of end-June. The number of...
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Gavekal Research
Nick Andrews
Jul 08th 2021
Video: How Brexit Britain Shapes Up
Six months after the UK properly left the European Union, the shape of the emerging post-Brexit economy is becoming a little clearer. Despite distorting effects from the pandemic, the impact on trade from being outside the EU’s single market can be seen, arguments about the UK’s position as a manufacturing hub can be tested and the future shape of Britain’s once super-charged financial services sector is coming into focus. Nick Andrews reviews...
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Gavekal Research
Will Denyer
Jul 07th 2021
Demographics And Prices
Starting in the early 1980s, the world became increasingly flush with people in their prime working and saving years. That trend, however, has largely run its course and may now be going into reverse. As a result, investors should consider what economic trends have demographic drivers, making them vulnerable to a structural shift occurring.
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Gavekal Research
Louis Gave
Jul 06th 2021
The Inflation Quandary
Markets seem to be comforting themselves that incipient inflation is, as the Federal Reserve has argued, a transitory phenomenon. Louis is skeptical that this is the case. He sees no evidence of any deflationary shocks that could squeeze price pressure, while at the same time, Western policymakers are doing all in their power to pump up demand.
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Gavekal Research
Tom Holland
Jul 06th 2021
Opec Frays
Last year, when Opec+ talks broke up without an agreement on setting production quotas, the oil price collapsed. On Monday, when Opec+ talks broke up without an agreement on setting production quotas, the oil price surged. The majority of market watchers see no inconsistency, but they are making some large assumptions, which deserve close scrutiny.
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Gavekal Research
Anatole Kaletsky, Tan Kai Xian, Udith Sikand
Jul 02nd 2021
Webinar: Can Things Really Keep Getting Better?
The US economy continues to break growth records as it reopens and other big regions may be set to go the same way, while Asia continues to prosper from a strong export outlook. The question is not whether the world economy slumps back into a funk, but whether growth expectations are now set too bullish.
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Gavekal Research
Nick Andrews
Jul 01st 2021
Video: Can Italy Recover?
In response to the Covid economic shock, the European Union has vowed to adopt more expansive fiscal responses and limited mutualization of national debts. The country where this approach will fall, or rise is Italy. In this interview, Nick offers a view on whether it will be enough for Italy to mount a comeback.
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Gavekal Research
Tom Miller
Jun 28th 2021
The G7’s Rival To The Belt And Road
With the launch of “Build Back Better World,” the world’s rich democracies want to take on China’s Belt and Road Initiative. The G7 sees the initiative as a chance to re-energize international development finance. The plan is worthy, but the nuts and bolts of providing such projects in poor countries suggests that China does not face serious competition.
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Gavekal Research
Nick Andrews
Jun 28th 2021
The First To Normalize
The Bank of Mexico last week joined a growing number of emerging-market central banks that have hiked policy rates this year. Developed markets, in contrast, have stayed dovish as they are not overly worried about inflation and fret about chocking off their recoveries. But there is a good chance that the BoE will be the first big Western central bank to normalize policy in 2022.
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