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Chief Economist’s Comment – 13 Jan 2019


Sunday Wrap

by Erik F. Nielsen, Group Chief Economist & Global Head of CIB Research


   Short summary

I’ll argue that (a) the recent European economic slowdown is less worrisome than it appears, and (b) the greater risk to the 2019 global economic outlook is the US and China.


On balance, policies won’t be particularly helpful as we are heading for a gradual global slowdown.


Yet, following the brutal ending to 2018 in most markets, we are probably getting close to a turn in risk appetite – maybe sometime during the first half of the year?


I’ll do a brief summary of the sentiment at our big annual CEE winter conference this past week in Kitzbühel.


   Kurzzusammenfassung.   Publikation nur auf Englisch verfügbar

Ich werde argumentieren, dass (a) die jüngste konjunkturelle Verlangsamung in Europa weniger Besorgnis erregend ist als es den Anschein hat und (b) die größeren Risiken für den Weltwirtschaftsausblick 2019 von den USA und China ausgehen.


Per Saldo wird die Politik auf dem Weg zu einer allmählichen globalen Abkühlung nicht sonderlich hilfreich sein.


Dennoch nähern wir uns nach dem brutalen Jahresende 2018 in den meisten Märkten wahrscheinlich einer Wende im Risikoappetit – vielleicht irgendwann in der ersten Jahreshälfte?


Ich werde kurz die Stimmung bei unserer großen jährlichen CEE-Winterkonferenz zusammenfassen, die in der letzten Woche in Kitzbühel stattfand.


   Breve riassunto.   Pubblicazione disponibile solo in inglese

A mio avviso (a) il recente rallentamento economico europeo è meno preoccupante di quanto sembri e (b) il maggiore rischio per le prospettive economiche globali del 2019 è posto da Stati Uniti e Cina.


Nel complesso, le politiche economiche e monetarie non forniranno particolare aiuto poiché ci dirigiamo verso un graduale rallentamento congiunturale su scala mondiale.


Tuttavia, dopo la pessima fine del 2018 nella maggior parte dei mercati, ci stiamo probabilmente avvicinando a una svolta nella propensione al rischio – potenzialmente nella prima metà dell’anno.


Una breve sintesi del clima prevalente alla nostra maggiore conferenza annuale invernale per l’area CEE che si è tenuta la settimana scorsa a Kitzbühel in Austria.






15 Nov 2018


UniCredit Macro & Markets 2019-20 Outlook

Countries: United States, Germany, France, Italy, Spain, Austria, CEE, United Kingdom, Sweden, Norway, Switzerland, China


Get defensive as growth slowdown looms

Webcast    Presentation

Macro: Global growth is likely to moderate further to 3.4% in 2019, with the slowdown set to intensify in 2020 as the US slips into a mild recession. The Fed will probably hike rates through 1H19 and reverse course in 2020 with three cuts. The ECB will have just enough time to exit negative rates in 1Q20 before eurozone growth weakens materially.


FI: We expect 10Y US yields to peak in the 3.25-3.50% range in mid-2019 before falling back to 2.75% by year end, with the curve inverting. Pressure on core EGBs is likely to be limited. We expect BTP spreads to widen to 350-375bp in 1H19 due to high supply and political uncertainty, before easing back to 275bp later in the year.


FX: EUR-USD is likely to slip to 1.08 by mid-2019, reflecting the risk picture and the US-eurozone growth differential. A reversal back to 1.20 seems likely in 2020 as the Fed starts cutting rates. Sterling has room to rebound once Brexit-related uncertainty recedes. The JPY and the CHF will likely rise over a two-year horizon.


Equities: We expect 2019 to be a volatile – and mostly unattractive – year for equities. Our 2019 year-end index target for the Euro STOXX 50 is 3300, for the DAX 12000 and for the FTSE MIB 19800. 2019 will be dominated by a slowdown in earnings growth globally. We still consider consensus estimates to be too optimistic.


Credit: Investors should prepare for considerable spread widening in 2019 as there will be a slowdown in earnings alongside an economic deceleration. Credit fundamentals of European corporates are in better shape than those of US peers and a decline in issuance activity will partly offset the substantially reduced demand from the CSPP.


CEEMEA: EMFX should continue to perform poorly in trade-weighted terms given the deteriorating trend in global trade volumes, but EMFX-USD could get a lift along with EUR-USD in 2H19. EM credit will likely face pressure in 1H19 but some relief should be seen in 2H19 as the dollar eases and US yields come down.







4Q18 – 27 Sep 2018


The UniCredit Economics Chartbook

Countries: Spain, Portugal, France, Poland, China, Germany, Hungary, Sweden, United Kingdom, Austria, Czech Republic, Euroland, Greece, Italy, Norway, Russia, Switzerland, Turkey, United States


Global growth still resilient, but less synchronized

The global business cycle has lost impetus as the geographical growth pattern has become more uneven, with the US outperforming most other developed countries and some emerging markets (EM) experiencing turbulence. After having declined earlier in the year, our proprietary Global Leading Indicator now suggests stabilization in the growth rate of global trade at a level just below trend. However, manufacturing PMIs in most countries are still drifting lower and trade tensions between the US and China have intensified recently, posing downside risks to the global economy. Since the US and China account for about 40% of global economic activity, an escalation could not only weigh on growth in these two countries but is likely to spill over to the rest of the world. As of today, about 2% of global trade has been affected by higher tariffs. Tensions in EM have so far remained contained to countries with weak fundamentals and we do not expect…






4Q18 – 27 Sep 2018


CEE Quarterly      > english     > german

Countries: Bulgaria, Czech Republic, Slovenia, Hungary, Russia, Slovakia, Bosnia and Herzegovina, Croatia, Poland, Romania, Serbia, Turkey, Ukraine

   A test of resilience

Emerging market (EM) growth will depend more on domestic demand in 4Q18 and 2019 as global trade growth slows further.


Reliance on capital inflows, macroeconomic imbalances and diverse policy stances will lead to growth differentiation in EM in general and CEE in particular, at a time when financial conditions are expected to tighten in developed markets (DM).


At the same time, capital scarcity could stoke up contagion risks and affect financial stability across EM.

Mounting political risks add to uncertanty, with…


   Ein Härtetest

Nachdem das Welthandelswachstum weiter nachlässt, wird das Wachstum in den Schwellenmärkten in 4Q18 und 2019 stärker von der Binnennachfrage abhängen.


Die Abhängigkeit von Kapitalzuflüssen, makroökonomische Ungleichgewichte und unterschiedliche politische Ausrichtungen werden in den Schwellenmärkten (Emerging Markets – EM) und insbesondere in der Region Mittel- und Osteuropa (CEE) zu einem Wachstumsgefälle führen, während zugleich in den entwickelten Märkten (Developed Markets – DM) eine Straffung der Finanzierungsbedingungen zu erwarten ist.


Kapitalverknappung könnte Ansteckungsrisiken mit sich bringen und die Finanzstabilität in allen Schwellenmärkten beeinträchtigen.


Durch steigende politische Risiken wird die Unsicherheit…


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    Global Head of CIB Research

    Erik F. Nielsen

    UniCredit Bank AG London Branch
    Moor House, 120 London Wall
    EC2Y 5ET London