pandemic

Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters. What happened? This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.   "Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.    Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.    Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.   Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.   Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Siemens posted its first loss since 2010, yet shares are gaining

In the UK, many sectors are controlled. Yesterday there was an impromptu that the CMA imposed a fine on BMW, and today the FCA on the consumer bank Santander. Moreover, the investment attractiveness of the US still remains the best. CNBC will consider the magnitude of the consequences of the pandemic in the United States. In this article: Foreign direct investment UK Santander bank fined Consequences of the pandemic Idris Elba in the story expansion for Cyberpunk 2077 Megatrend potential Read more: Amazon, Google, Microsoft And Oracle Received A Cloud Deal From The Pentagon| FXMAG.COM The US is the best region for foreign direct investment Foreign investments due to the fact that they affect the economic profile of the region of location, because due to their impact on the production potential, changes in the labor market and the level of technological development. The more such investments in a given region, it indicates its attractiveness and builds its potential. Foreign investments have a positive impact on loyal markets because they generate new jobs (increase in employment - decrease in unemployment) and increase the circulation of money. As data showed the US, the Netherlands and China are at the forefront of regions with the largest number of foreign direct investments. The United States recorded the largest increase of inward foreign direct investment of all economies in 2021. The share of global foreign direct investment for the largest economies such as the United States and China has increased recently, while that of offshore financial centers has fallen. Our latest blog looks at how and why this happened: https://t.co/eWevJBEsYE pic.twitter.com/SpDiuJ0KBK — IMF (@IMFNews) December 8, 2022 UK Santander bank fined $132 million From a tweet of Reuters Business learns that Santander Bank has been fined by the UK Financial Supervision Authority (FCA). According to the FCA, the British branch of this bank did not perform its functions properly in order to prevent money laundering. Santander accepted the punishment. But what does this mean for the bank? This will largely affect its market image. Along with this, it may cause that in the UK it will be less likely to be chosen by new kilets. So far, the most important task for the British branch will be to improve its systems. UK financial watchdog fines Santander bank $132 million https://t.co/dZby7GFtPm pic.twitter.com/oLSu3SZXv1 — Reuters Business (@ReutersBiz) December 9, 2022 Consequences of the pandemic for the US The effects of the coronavirus pandemic are still underestimated. Every economy around the world is grappling with its direct consequences. Even the world's largest economy will have to bear high costs. They are currently valued at $3.7 trillion. Given the current economic situation, this can be a serious problem. You can find out more on CNBC's "This week, your wallet." Long Covid has affected millions of Americans — and it may cost the U.S. economy $3.7 trillion, according to one estimate.Join the conversation on "This week, your wallet." https://t.co/jlJPGtyvst — CNBC (@CNBC) December 8, 2022 Idris Elba and CD Projekt RED CD Projekt RED continues to work with Hollywood stars. After cooperating with Keanu Reeves, the studio announced that Idris Elba will play one of the main characters in the story expansion for Cyberpunk 2077. This time he will play Solomon Reed, an FIA Agent for the NUSA in Phantom Liberty. Introducing Idris Elba as Solomon Reed, an FIA Agent for the NUSA. Team up and take on an impossible mission of espionage & survival in #PhantomLiberty, a spy-thriller expansion for #Cyberpunk2077 set in an all new district of Night City. Coming 2023 to PC, PS5 & Xbox Series X|S. pic.twitter.com/jjTuv5PDXA — Cyberpunk 2077 (@CyberpunkGame) December 9, 2022 Megatrend potential Morgan Stanley has a habit of posting tweets that give clues not only to investors, but also, or rather, to average citizens in particular. Unpredictable markets and changing economic conditions make it difficult to know how to invest for the future and how to manage your portfolio. Financial institutions such as Morgan Stanley are constantly researching and drawing new ideas with which they are happy to share. This time he looks at megatrends and how they can help. There is no doubt that the changed has a big impact on everything, especially the social ones. What makes a trend a megatrend? Learn how structural changes in the economy and society can power growth in your portfolio for years to come. https://t.co/L4FLdkgSAz — Morgan Stanley (@MorganStanley) December 9, 2022

The green revolution is taking place in every country. India is also joining the ranks in planning to invest in the Green Hydrogen Industry. Despite the passage of time, covid is still a threat, as exemplified by China. In this article: India and green ammonia China’s covid situation F&D Magazine India and green ammonia Recently, it is common to hear that a country is planning to allocate a billion dollars to renewable energy sources. It is also becoming more and more popular in the Asian region. India is planning a $2 billion incentive program for the green hydrogen industry. The Indian government expects the industry to invest 8 trillion rupees in green hydrogen and its derivative green ammonia by 2030, said an industry manager and another government official. Green ammonia is produced by combining nitrogen with hydrogen using renewable energy sources; it can be used by the fertilizer industry or as a fuel or a convenient means of transporting hydrogen. India intends to sell 70% of its production to countries such as South Korea, Japan and the European Union. The Indian government estimates that global demand for green hydrogen will exceed 100 million tons by 2030, up from nearly 75 million tons today. The government also plans for the country to reach an electrolyser production capacity of 15 gigawatts in stages by 2030. This would be almost 10 times the current global production capacity. Exclusive: India plans $2 bln incentive for green hydrogen industry - sources https://t.co/aXgHvIYPCj pic.twitter.com/tledy7g4Ap — Reuters Business (@ReutersBiz) December 27, 2022  Read next: Shopping On Etsy Continues To Be Popular| FXMAG.COM China’s covid situation Recent years have undoubtedly been difficult. The year 2020 has started the tumultuous time of the coronavirus pandemic. Currently, the attention of most economies is focused on the struggle with the energy crisis, high inflation and the development of events in Ukraine. But not China. In China, the fight against the pandemic is still going on. Earlier this month, mainland China abruptly ended many Covid controls. Meanwhile, infections have skyrocketed, putting pressure on the country's already overburdened healthcare system. It is unclear to what extent the Covid outbreaks have affected the country, with few official figures on recent infections and deaths. In some Chinese provinces, the situation is really serious.Critical care beds and resources in some Chinese provinces are approaching capacity as Covid-19 infections increase. Chinese provinces hit hard by Covid are seeing a strain on critical care, health officials say https://t.co/RAg3ttzLA1 — CNBC (@CNBC) December 27, 2022 IMF Magazine The latest F&D Magazine focuses on the energy crisis and the difficulties of many economies. The energy crisis began with Russia's attack on Ukraine. Europe could soon experience its first winter without Russian gas, risking even higher prices, gas shortages and a severe recession. European governments have begun to implement a range of policies. The increase in wholesale electricity prices reflects the increase in natural gas prices and shortages in nuclear and hydro power generation. In some cases, even the increase in electricity generation from coal and gas was not enough to meet the demand. As a result, prices have gone up so high. This difficult situation also has its positive effects. The situation will ultimately encourage the expansion of renewable energy and more efficient use of electricity.   The latest issue of F&D Magazine focuses on the scramble for energy and what geopolitical tensions mean for the clean transition. Read and download here. https://t.co/KsNThOWIIq pic.twitter.com/r4UC7COuot — IMF (@IMFNews) December 26, 2022

US household wealth rose $3tn in the first quarter A strong performance by equity markets lifted household wealth, helping to offset declines in real estate and cash, checking and time savings deposits. With wealth $35tn higher than before the pandemic households continue to have a strong platform to withstand intensifying economic headwinds, offering hope that any recession will be short and shallow.   Wealth increase led by equity market gains The value of assets held by US households increased by $3.05tn in the first three months of the year, taking the total assets held by the household sector to $168.5tn. Liabilities rose just $23bn to $19.6tn, leaving net household worth at $148.8tn.   Rising equity markets was the main factor leading to the increase, but holdings of debt securities increased $893bn. These factors more than offset the $617bn drop in household wealth in real estate and the $415bn decline in cash, checking and time savings deposits held by US households.     Excess savings are dropping We have to remember that March saw the collapse of Silicon Valley Bank and Signature Bank with deposit flight hitting many of the small and regional banking groups. We have subsequently seen this situation stabilize although some money that would typically be left in banks has been switched to money market funds.   Nonetheless, we do appear to be seeing much of the excess saving built up during the pandemic via stimulus payments and extended and uprated unemployment benefits being eroded – it is now "only" around 1.8tn above where we would expect it to be based on long run trends. This is especially the case now that households have an apparent appetite to spend, particularly on services.     Household balance sheets in a good position to help limit the downside from a recession After the most rapid and aggressive period of interest rate hikes seen in over 40 years plus the tightening of lending conditions currently being experienced in the US, recession fears are mounting. Households will play a huge role in how prolonged and deep any downturn will be given consumer spending accounts for more than two-thirds of economic activity in the United States.     Household assets are 860% of disposable income while liabilities are ‘just” 100% of disposable incomes. While this is down on the peak seen in 1Q 2022 and there are questions over wealth concentration, this is a much better position than any previous recessionary environment and means that the consumer sector should be better able to withstand intensifying economic headwinds. Consequently, we remain hopeful that a likely 2023 recession will be modest and short-lived assuming a swift easing of monetary policy from the Federal Reserve.

Polish market after 5 months - where are we at? We are approaching the halfway point of 2023. Before the semi-annual investment market reports are released, Avison Young is sharing the current results.     Market adaptability The current results do not look much optimistic. However, this is a temporary state. Poland’s real estate market has stable foundations, and investors are highly adaptable, which is confirmed by the results achieved in previous years. Let's take a quick look at how the market has responded to the challenges emerging in the last 3 years. COVID-19 had a huge impact on the economy and customers behaviour, which naturally translated into the real estate market and investors’ activity. In the face of restrictions and the growing importance of staying local, customers more often chose “convenience retail” than shopping centres; home office and the hybrid work model developed. The growing pandemic boosted e-commerce (according to the Statistics Poland, the share of online shopping doubled in just two months from 5.6% in January and February 2020 to nearly 12% in April 2020), which in turn influenced the dynamic development of the industrial sector. However, investors relatively quickly adapted to the new conditions, and the total investment volume in 2020 amounted to EUR 5.3 billion and EUR 5.9 billion in 2021. Certainly, these results were lower than the volumes from 2018 and 2019, but they secured the 3rd and 4th highest position in terms of volume in the history of the market. In 2020, investors focused on “core” office buildings, warehouse portfolios and retail parks. In 2021, we saw record market liquidity (166 transactions) and - due to the prolonged period of the pandemic – a shift in investors' attention to opportunistic transactions in shopping centres and office buildings.   In 2022, the outbreak of war in Ukraine triggered further market turmoil, record high inflation, rising interest rates and escalating investment uncertainty. Nevertheless, this challenging year ended with a volume close to 2021’s (5.8 billion), which once again confirmed the maturity and liquidity of Polish real estate market. During the noticeable slowdown and the wait-and-see strategy adopted by investors, the market saw 5 historically large transactions accounting for 40% of the total investment volume, including the sale of prime Warsaw office buildings (The Warsaw Hub and Generation Park Y), the first since 2018 major prime shopping centre transaction (Forum Gdańsk), the sale of Danica warehouse portfolio and the creation of two JVs by EPP. For comparison, the decline in transaction volumes compared to 2021 in Western Europe reached an average of nearly 20%, and in the region of Central and Eastern Europe less than 3%.   In 2022, investors turned their attention to regional markets outside the main cities, which applied to all real estate sectors. Office buildings in the regions accounted for 68% of transactions and 50% of the total volume on the office market. In the industrial sector, 40% of the volume concerned facilities outside the largest warehouse hubs. Transactions of shopping centres in medium-sized cities appeared on the retail market, but new players continued to focus on safe retail parks.   Current status We are estimating that the volume of closed transactions announced publicly from the beginning of this year to the end of May, amounted to only around EUR 800 million. For comparison, in 2021 and 2022, the volume of transactions in the same period amounted to over twice as much. There were no historically large transactions, which in the first quarter of 2022 (The Warsaw Hub, EPP’s two joint venture investments) alone accounted for 75% of the total volume. Nevertheless, compared to the countries of Central and Eastern Europe, we still remain the most attractive and liquid market.   Offices slowed down On the office market, only 7 transactions were concluded during this period, concerning “core +” and opportunistic buildings located in Warsaw, outside the city centre. Avison Young investment team represented the seller in the divestment of Celebro and Wola Retro buildings.   Sale & leaseback at warehouses Since the beginning of the year, the dominance of the western regions in terms of location, mainly Lower Silesia, is clearly visible in the industrial sector. In turn, in the last 2 months, sale & leaseback transactions prevailed. Portfolio transactions are yet to be recorded.   Retail parks decelerate In the first 5 months of 2023, only one retail park transaction was completed and announced. In the first quarter, opportunistic smaller shopping centres and redevelopment schemes were the most popular. An example of such a transaction may be the sale of 4 commercial facilities portfolio located in Koszalin, Szczecin, Wałbrzych and Strzegom, where the Avison Young team represented the seller. In turn, in the last 2 months, the subjects of the announced transactions were large-format retail properties: 3W portfolio and Castorama in Płock.   Strategies of banks and strategies of buyers “One of the reasons for the reduced number of transactions and volume in the first 5 months of 2023, is that the process of adjusting price expectations on the seller-buyer line is still ongoing. However, we can see the first signs indicating that this situation may improve by the end of the year - says Marcin Purgal, Senior Director, Investment at Avison Young. - Banks, although still very selective, are analysing new financing products more and more efficiently. The situation related to interest rates seems to be quite predictable, inflation is slowing down, but it still takes time for the market to stabilize and get back on track. Currently, many buyers are trying to take advantage of the market situation and place bids far below property valuations, hoping to get a good deal. However, many sellers are in no rush to sell. That changes when the seller has to liquidate the fund, funding runs out, the property stops performing, or someone fails.”   What awaits us in the second half of the year? We expect that in the second half of the year, the commercial real estate market in Poland will be dominated by opportunistic and “value add” assets in every sector. Nevertheless, the best office buildings, whether in Warsaw or in major regional cities, as well as warehouses, should also be of interest to investors.   Authors: Paulina Brzeszkiewicz-Kuczyńska (Research and Data Manager) and Marcin Purgal (Senior Director, Investment)

The Eurozone and Schengen entrance on 1 January 2023 sealed the completion of Croatia’s EU integration story. The economy has shown a remarkable resilience through the pandemic and RussiaUkraine conflict, marking a striking difference compared to the 2008-09 global financial crisis.   While there is a long way to go in terms of catching-up with the Eurozone average in almost all aspects, the authorities seem quite determined to make good use of the EU’s Recovery and Resilience Facility, increasing fixed investments while keeping public deficits within very reasonable levels. Better terms of trade compared to 2022 and a tourism boost from Schengen entry might rebalance the external sector earlier than expected while quasi-balanced budgets could push the public debt ratio below the dreaded 60% of GDP over the next couple of years

In the labour market, the seasonally adjusted unemployment rate has turned stagnant from 2H22 onwards with the latest March data standing at 10%. However, the actual rate is likely to be higher as TurkStat pointed out that the Household Labour Force Survey could not be conducted in certain cities due to the earthquake disaster. Accordingly, both male and female employment has returned to pre-2018 volatility levels, while the informality rate is now close to the lowest in the current series, started in 2014. Despite the same recovery trend in supplementary indicators for labour force, wider definitions of unemployment, ie, the composite measure of labour underutilisation, have remained well above of pre-2018 levels. This implies the labour market has not fully recovered since the pandemic and an expected slowdown in activity could further add to challenges on this front.   Unemployment vs NPLs (%)   Breakdown of C/A financing (12m-rolling, US$bn)   Primary balance (12m-rolling, % of GDP)   Widening external imbalances The current account deficit has expanded rapidly since early 2022 driven by commodity and gold imports in addition to the widening impact of strong domestic demand. A strong increase in tourism revenues has limited the extent of expansion. For the remainder of the year, an improvement is likely given the recent normalisation in energy prices and gold imports, while recovery in global demand and a possible change in policy mix to a tighter stance should also be supportive for the foreign trade balance.   On the capital account, with official transfers from Russia and strong unidentified inflows, official reserves recorded an increase last year, though the quality of external financing continues to overshadow the outlook given tighter global financial conditions. In the first quarter of this year, total flows have again weakened in the absence of strong unidentified inflows, leading to pressure on international reserves.     Budget deficit on the rise In the first four months of this year, there has been a major fiscal expansion pulling the central administration budget deficit to c.3.0% of GDP. According to the real budget trend based on the programme (IMF) defined primary balance realisation, which excludes one-off revenues, there was a deficit of around TRY42.5bn in April, bringing the primary balance for the last 12 months to a deficit of 1.9% of GDP.   In addition, the 12-month budget balance excluding one-off revenues rose to a deficit of 2.8% of GDP. Going forward, elevated spending pressures during the election period and an expected slowdown in activity and reconstruction efforts after the earthquakes point to a higher deficit, to above 5% of GDP. However, tax hikes and administrative price hikes to address the widening in the budget deficit in 2H23 should not be ruled out.   Signals of moderation in lending The latest volume data after the elections hint at momentum loss. Accordingly: (1) non-SME corporate lending decelerated sharply in both state and private banks though appetite in the latter dropped to single digits in annualised 13-week moving average terms. This shows increasing challenges for corporates in accessing financing lately; (2) SME lending momentum hand is strong but there has been a moderation in private banks. On the retail side, (3) credit cards have remained on a strong growth path given the supportive impact of low real interest rates; (4) there are signals that momentum in mortgages is about to peak; (5) while the appetite for GPLs is on the decline, in recent months this has been more evident in state banks.   Regarding deposits, FX deposit formation on both the retail and corporate sides remain in negative territory showing the impact of “liraization” moves to control residents’ FX demand.   Banking sector volume expansion

Analysts at Freedom Finance Europe have highlighted several companies that investors should look out for in the second half of this year. One of them is Amazon (AMZN), which continues to grow revenues in key segments. "The company has too many positive catalysts to ignore, and the recent weakness provides an opportunity to enter into an attractive asset", says the speaker. In addition, despite the challenging macroeconomic environment, AMZN's revenues in the latest quarter exceeded the forecast range to $127.4 billion and operating profit was $4.8 billion. These results are due to growth in e-commerce. North American region, for example, saw double-digit sales increases and a return to profitability, while the international segment also saw strong growth. On top of that, company's cloud business revenues, Amazon Web Services were up 16% year-on-year.  "Management forecasts sales growth of 10%, to $133 billion in the next quarter, with operating profit expected to remain stable, at between $2 billion and $5.5 billion. These results and forecasts look quite compelling. The company has also built an unrivalled logistics network for parcel delivery, sometimes with same-day delivery", said the speaker. These factors take Amazon’s potential to a maximum target price of $220.  Next up is the well-known coffee chain Starbucks (SBUX). As the speaker explained, the company is considered an attractive and long-term investment due to its commitment to shareholder value, revenue growth and higher earnings per stock. SBUX had a solid quarter. In Q2 2023, Starbucks had revenue of $8.7 billion, up 14% year-on-year. EPS increased by 36% compared to the same period in 2022. Even more impressively, Starbucks quarterly sales and EPS were 38% and 49% higher than the same period in 2019 (before the pandemic). The company also has a rewards programme that rewards customers for repeat purchases. For example, there are currently 30.8 million active loyalty programme members in the US. That's an increase of 15% over last year.   "Coffee is an integral part of society and it is hard to imagine a scenario where Starbucks ever disappears. The company has almost 37,000 shops and the goal is to have 55,000 outlets worldwide by 2030", the speaker added. The fundamental potential for an average target price is at $114. Another company that may be worth taking a closer look at is Booking Holdings (BKNG), which operates in the online travel industry. In particular, it offers services through its Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and OpenTable brands. Data from the Economist Intelligence Unit shows that the segment is expected to grow by 30% in 2023 as the number of Chinese tourists abroad may increase. "In previous years, the 'zero COVID' policy has held back tourism from China, which has recently been a major source of growth. As the situation changes this year, Booking Holdings could benefit from this. In addition, the number of trips remains below 2019 levels, which leaves room for growth and continues a solid recovery", explained the speaker. BKNG's revenue increased by $4 billion in the last quarter, and it continues to benefit from a network advantage that has allowed it to maintain its agency model rather than move to a vendor model where the online travel agency would be responsible for paying the fees. Fundamental potential for an average target price of $2800.  

Services PMIs (Jun) – 05/07 - despite the dire start of manufacturing activity, services have held up well but even here we are seeing pockets of weakness with France seeing a sharp drop in the flash numbers a few days ago, sliding from 52.5 to 48, while activity in the rest of the euro area remains broadly positive. This is an area that could help boost economic activity in Italy and Spain now we're in the holiday season and which may help avert a 3rd quarter of weakness. We're also expected to see positive readings from the UK and the US.   Fed minutes – 05/07 – recent briefings from various Fed officials do suggest that a divergence of views is forming on how to move next, as well as in the coming months, and while the commitment to a pause in June was well flagged the commitment and guidance did pose a bit of a problem to the Fed given the strong economic data only days before the meeting in question. Powell managed to overcome that with a strongly hawkish message at his press conference along with an upgrade to the central banks key economic forecasts. A number of members changed their dots to reflect the prospect that they were prepared to raise rates twice more by the end of the year, with a hike in July looking increasingly likely.  This was somewhat surprising given markets were pricing one more rate hike, however key in amongst this is the Fed's determination that markets stop pricing rate cuts by the end of this year. This insistence of pricing in rate cuts by year end has been one of the key characteristics that has helped drive recent gains in stock markets. This slowly appears to be being priced out, as is the possibility that the Federal Reserve, along with other central banks, looks to prioritise pushing inflation down at the risk of raising the level of unemployment. This week's minutes ought to give us an indication of the thought processes of the more dovish members of the FOMC, and how comfortable they are with the prospect of further rate rises.    AO World FY 23 – 05/07 – has had its share of problems after getting a huge lift during the pandemic as business for electrical goods shifted online. These growing pains presented problems of their own in terms of scaling its operations so when the inevitable slowdown happened the business struggled to cope as costs surged. Back in 2021 the shares rose to a record high of 443p, as a pandemic buying frenzy pushed the shares up from lows of 48.5p in the space of 9 months. It's taken a little bit longer to round-trip that journey with the shares hitting a record low back in August of 39p. We've seen a decent recovery since then, helped by a number of guidance upgrades this year, one on January, with the focus on reducing costs with revenues set to see a 17.2% decline from last year. In March EBITDA guidance was raised again, to between £37.5m and £45m, with management citing further margin improvements. In April this was followed by a Q4 trading update which predicted UK revenues of £1.13bn while updating its profit guidance to the top end of its recent range upgrade of EBITDA of between £37.5m to £45m. In a sign of confidence regarding AO's turnaround plan, in June Mike Ashley's Fraser Group acquired a 19% stake in the business at 68p per share in a welcome boost for the online retailer.  

Order a steeper curve, get wider spreads Her main point however, if correct, doesn’t necessarily scream curve flattening. In a nutshell, the new central banker pointed to the risk of a higher R* post-Covid, suggesting the assumption that inflation and rates will eventually fall to their pre-pandemic range may be misguided. Two interpretations ensue. In the short term, the comments suggest the BoE will err on the hawkish side rather than rely on mean-reverting models to forecast a fall in inflation. The longer-term implication is that a deeply inverted curve, premised on a relatively quick reversal of the current hikes, isn’t justified.   Given central banks’ track record in forecasting inflation, we do not blame markets for focusing on the near-term implications. We’ll hear from Joachim Nagel and Yannis Stournaras today, respectively ECB hawk and dove. It is fair to say, also in relation to the inverted curve, that hawks have won the argument. Recent comments suggest hawks are now succumbing to the temptation to accelerate Quantitative Tightening (QT) in order, perhaps, to transmit higher rates to the back end of the curve. The US and UK experience with QT, albeit different in some respects, suggest this is a tall order. Our view is that such comments would more likely affect risk premia across markets, from currently moderate levels.   Today's events and market view US markets are closed for Independence Day today so the responsibility of feeding market-moving developments will fall squarely on Europe’s shoulders. Unfortunately, the only data scheduled after the European open is Spanish employment. Bond supply will be lively on the other hand. The UK will sell £2bn of 30Y green gilt via auction. Austria will also be active in long-end primary markets, with 10Y and 30Y auctions.  Germany is scheduled to sell 10Y inflation-linked debt. Joachim Nagel and Yannis Stournaras, sitting at opposite ends of the ECB’s hawk-dove spectrum, are the two central bankers listed for today. Markets have been more sympathetic to the hawkish argument of late but the Reserve Bank of Australia's decision to keep rates unchanged overnight shows tighter policy could also be achieved through a much slower hiking pace.

French industrial production rebounds French industrial production rebounded in May more than expected, reaching its highest level since the start of the pandemic. Widespread rebound In May, French industrial production rebounded more than expected, increasing by 1.2% over the month, following a rise of 0.8% in April. Manufacturing output also rebounded, by 1.4% over the month (+0.6% in April). This rebound enabled manufacturing output to reach its highest level since the start of the pandemic, up by 2.9% year-on-year. March's weakness, due to strikes and production disruptions caused by protests over pension reform, has therefore been fully offset. Growth in May was seen across all the major product categories, although the energy-intensive industrial branches continued to suffer from the context of high energy costs. Production levels in steel, paper/board and basic chemicals remain between 13% and 24% lower than a year ago.   The outlook for industry remains difficult The rebound in industrial production is good news for the French economic outlook. In the short term, this should ensure that industrial production does not contribute negatively to GDP growth in the second quarter. Weak but positive growth seems most likely. Nevertheless, the outlook for industry over the next few quarters remains cloudy. According to survey results, business leaders' assessment of order books has remained very weak for several months, a sign of a major slowdown in global demand for industrial goods. At the same time, inventories of finished goods remain high. This means that production is likely to decline over the next few months as companies see no new orders coming in and have stocks to clear. The PMI indices for the manufacturing sector have been in contraction territory (below 50) since January.   Weak growth in 2023 and 2024 Ultimately, growth in the second quarter should be weak, but positive. Growth in the third quarter should have been better, supported by the strength of the tourism sector. However, the tense social context, with the recent protests and damage, means that there is a risk that this support will be slightly weaker than expected. Despite their significant microeconomic impact, events of this kind generally have an insignificant effect on economic growth. The fact that they took place at the beginning of the summer, at the height of the tourist season, may have a slightly greater negative effect (but probably no more than a 0.1 points reduction in growth).

Services more popular than goods During 2022, household consumption of goods declined due to rising inflation. Dutch consumers shifted a portion of their expenditures to services, which became fully accessible again after the pandemic. For example, the number of overnight stays, air travel, and visits to entertainment and recreational facilities increased significantly. This came at the expense of goods consumption, which has not grown since the second quarter of 2022. Durable goods such as cars, home furnishings, and also food are being purchased less. Domestic household consumption is expected to grow at a slow pace in the coming quarters, with demand for goods remaining under pressure.   Consumption services continued to grow, fewer goods purchased Domestic private consumption, YoY volume change

Germany needs an ‘Agenda 2030’. A stagnating economy, cyclical headwinds and structural challenges bring to mind the early 2000s and call for a new reform agenda   As Mark Twain is reported to have said, “History doesn't repeat itself, but it often rhymes.” Such is the case with the current economic situation in Germany, which looks eerily familiar to that of 20 years ago. Back then, the country was going through the five stages of grief, or, in an economic context, the five stages of change: denial, anger, bargaining, depression and acceptance. From being called ‘The sick man of the euro’ by The Economist in 1999 and early 2000s (which created an outcry of denial and anger) to endless discussions and TV debates (which revelled in melancholia and self-pity) to an eventual plan for structural reform in 2003 known as the 'Agenda 2010', introduced by then Chancellor Gerhard Schröder. It took several years before international media outlets were actually applauding the new German Wirtschaftswunder in the 2010s. It's hard to say which stage Germany is in currently. International competitiveness had already deteriorated before the pandemic but this deterioration has clearly gained further momentum in recent years. Supply chain frictions, the war in Ukraine and the energy crisis have exposed the structural weaknesses of Germany’s economic business model, and come on top of already weak digitalisation, crumbling infrastructure and demographic change. These structural challenges are not new but will continue to shape the country’s economic outlook, which is already looking troubled in the near term. Order books have thinned out since the war in Ukraine started, industrial production is still some 5% below pre-pandemic levels and exports are stuttering. The weaker-than- hoped-for rebound after the reopening in China together with a looming slowdown or even recession in the US, and the delayed impact of higher interest rates on real estate, construction and also the broader economy paint a picture of a stagnating economy. A third straight quarter of contraction can no longer be excluded for the second quarter. Even worse, the second half of the year hardly looks any better. Confidence indicators have worsened and hard data are going nowhere. We continue to expect the German economy to remain at a de facto standstill and to slightly shrink this year before staging a meagre growth rebound in 2024.   Headline inflation to come down after the summer What gives us some hope is the fact that headline inflation should come down more significantly after the summer. Currently, inflation numbers are still blurred by one-off stimulus measures last year. Come September, headline inflation should start to come down quickly and core inflation should follow suit. While this gives consumers some relief, it will take until year-end at least before real wage growth turns positive again. At the same time, an increase in business insolvencies and a tentative worsening in the labour market could easily dent future wage demands and bring back job security as a first priority for employees and unions. In any case, don’t forget that dropping headline inflation is not the same as actual falling prices. The loss of purchasing power in the last few years has become structural.

Fed meeting, Microsoft earnings  There was nothing in the list of flash PMI data released yesterday morning to make investors think that economic activity in Europe is doing fine. All numbers were in the red, they all missed expectations. German and French manufacturing plunged further in the contraction zone and German manufacturing PMI even plunged below 39, a number we have not seen since summer 2020, which was the heart of the pandemic. The war, the energy prices, and/or the European Central Bank (ECB) tightening are taking a toll on the German manufacturing. And even the German car sector is struggling. Tesla for example sold more cars in H1 than Volkswagen, BMW, Mercedes and Porsche combined. Cherry on top of the bad news, the Spanish PPI showed an 8% contraction versus -10% penciled in by analysts. The EURUSD plunged below the 1.11, the trend and momentum indicators turned negative hinting that the selloff in the runoff to Thursday's ECB meeting could extend toward the 1.10 mark, as the soft economic data brought forward the expectation that the ECB is certainly approaching the end the most aggressive tightening cycle of its relatively short history. But the softer-than-expected fall in Spanish PPI still keeps some hawks defending the idea that the ECB won't stop fighting inflation if inflation doesn't cool enough.     Don't look now, but across the Channel, the PMI numbers didn't look better. The UK manufacturing PMI fell to 45, while the composite PMI avoided the contraction territory by just a few points. Cable sold off to the lowest level in two weeks and is now testing the May to now ascending channel's base, as traders put more weight on the damage that the rising Bank of England (BoE) rates will do to the British economy, than on the good they might do to sterling holders.   Across the Atlantic Ocean, the picture was a little but more mixed. US manufacturing remained in the contraction zone but contracted much slower than expected by analysts, but services and overall activity grew more slowly than expected, still. The US dollar index gained for the 5th consecutive session and is consolidating above the 101 level at the time of writing, as investors continue positioning for the Fed meeting that starts today.   The Fed starts its two-day policy meeting in just a couple of hours from now, and will highly likely announce a 25bp hike on Wednesday. But what Fed officials will also do is to remind investors that the tightening cycle is probably not over and that there will probably be another rate hike on the US' horizon. So yes, there is a great chance that the Fed will spoil your mood if you are among those thinking that this week's rate hike will be the last for this tightening cycle in the US.     Markets  US stocks traded higher yesterday with the S&P500 adding 0.40% and Nasdaq 0.14% after its special rebalancing. The US 2-year yield advanced past 4.90% and fell this morning. While the VIX index shows no sign of a particular stress from equity traders, BoFA's MOVE index is close to 110 level, versus around the 60 level prior to the Q3 of 2021: bond traders remain very much uncertain about the number of additional rate hikes that the Fed could deliver. And there is no line in the sand, the Fed will continue hiking if the US jobs market, consumption and housing market remain resilient to interest rate hikes.    Microsoft earnings  Today, Microsoft is due to announce its Q2 earnings after the bell. Focus is on whether, and by how much Microsoft benefited from the AI craze and how much AI boosted growth for Azure – which was under pressure since a couple of quarters due to macro factors. On Friday, a Goldman Sachs analyst reiterated his buy rating for MSFT and revised his price target from $350 to $400 a share. But because  there is too much optimism in the market, it may be gently time to take profit, wait for the next bullish wave and rotate toward where the next action is expected to happen.  The Magnificent Seven thrived so far this year and the un-magnificent 493 other stocks remained mostly on the sidelines. What we see these days is that the un-magnificent other stocks are also catching up with the rally. Today, 70% of the S&P500 stocks trade above their 200-DMA. Morgan Stanley's Mike Wilson said that 'they were wrong' regarding their bearish stock market expectation this year, while JP Morgan's Kolanovic insists that a selloff is coming. And one day, he will be right!    By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank 

German industrial ‘bad news show’ continues A further drop in German industrial production in June is another illustration of the country's ongoing stagnation.   The industrial bad news show continues. German industry continued its downward trend in June as industrial production dropped by 1.5% Month-on-Month, from -0.1% MoM in May. For the year, industrial production was down by 1.7%. Industrial production is still more than 5% below its pre-pandemic level, more than three years since the start of Covid-19. Production in energy-intensive sectors escaped the negative trend and increased by 1.1% MoM in June, still down by more than 12% over the year. The disappointing industrial production performance in June was mainly driven by the automotive industry (-3.5% MoM) and the construction sector (-2.8% MoM). With today’s numbers, the risk has increased that the flash estimate of stagnating GDP growth in the second quarter could still be revised downwards.   More industrial disappointments to come Today’s industrial production data will do little to change the current hangover mood in Germany. The country finally seems to have woken up to the reality that it's lost international competitiveness over the last decade on the back of too few investments and hardly any structural reform. The pandemic and the war in Ukraine have worsened the problems without being the root cause. It doesn’t come as a surprise that according to a recent survey, German companies have never been more pessimistic about the country’s international competitiveness than currently. With earlier investments and reforms, the economy could have mastered the current challenges better. As a result, economic stagnation is the new normal. And in this new normal, the ‘traditional’ growth drivers of the German economy, i.e. industry and exports, have actually become a drag on growth. Looking ahead, last week’s surge in industrial orders brightened the industrial outlook somewhat. However, up to now, the rebound in new orders in May and June has only offset the sharp drop earlier in the spring but is not yet the start of a new positive trend. In fact, ongoing high inventories and the order book deflation until springtime still suggest more industrial disappointments in the months ahead.

Fiscal support Huge government deficits in the 1970s may not have caused the initial inflation spike, but they undoubtedly amplified it. So, too, did the massive interventions at the start of the Covid pandemic and the “excess savings” pile they helped create. That story is now clearly changing. The US fiscal position is tightening and in the short term, a resumption of student loan repayments is symptomatic of Congress’ reluctance to allow further big spending packages. In the EU, the Stability and Growth Pact – the rules that mandate fiscal responsibility by European governments – is coming back to the fore. As we wrote a few months back, there’s a growing recognition that the rules need to be more flexible, especially when it comes to public investment. However, political uncertainty in the Netherlands and Spain could undermine an agreement on the new rules. In this scenario, and in the absence of yet another activation of the escape clause, eurozone fiscal policies would become more restrictive. That said, after a decade of austerity and ultra-low interest rates, particularly in Europe, the lesson from both the pandemic and the Ukraine War is that fiscal policy can be a powerful lever. Met with a fresh, unexpected shock, we suspect the bar to another large fiscal intervention is lower than it might have been in the 2010s.   Worker power and unionisation Trade unions were a powerful force in the 1970s, a sharp contrast to what we see today. The share of employees who are members of trade unions has decreased markedly, a trend that’s gone hand-in-hand with the decline of manufacturing across the West.       But we need to make a distinction between trade union membership (which is generally low in Europe, at least according to official data) and collective bargaining coverage. The latter is the proportion of employees whose wages are centrally negotiated, and in Europe, that’s often in excess of 90% and has typically changed much less since the 1980s. Negotiated wage growth is the highest in 30 years, albeit it has tracked well below headline inflation, and this looks more like a "catch-up" than any kind of wage-price spiral. Even in countries where collective bargaining is unusual (the US and UK), there are hints that worker power is growing. On a one-year rolling basis, the number of strike days is at its highest level since at least the early 2000s in the UK and US. That doesn’t mean union membership is increasing per se, not least because the power of trade unions under law in the likes of the US and UK has reduced over time. But it does suggest workers feel they can push for inflation-busting pay rises.       In short, regardless of whether unionisation increases over the coming years, the pandemic has shown that wage growth can still rise quickly if there are widespread worker shortages. This is changing, and most countries have seen participation rates return to pre-Covid levels. And even where they haven’t (as in the UK), there are signs that worker supply is improving. We think economic slack will increase as rate hikes increasingly begin to bite. Still, the pandemic also gave us a flavour of how the ageing populations we see in many developed economies could actually be inflationary in the medium term. In the US in particular, we saw millions of people retire in a very short amount of time. And that undoubtedly contributed to worker shortages which fed through to higher wage growth. Many economies were already starting to see this in certain industries (e.g. long-distance lorry driving) before Covid-19, and worker shortages are likely to become a persistent issue over the coming years. The ability of workers to protect real wages in future inflation shocks may well increase. That said, it’s possible that some of the labour scarcity associated with ageing will be countered by technological advances, not least Artificial Intelligence.  

The current international debate on whether or not Germany is once again the 'Sick man of Europe' could finally bring about the long-awaited sense of urgency for a new reform programme by the government. It has been the big summer theme in Europe: weak growth, worsening sentiment and pessimistic forecasts have brought back headlines and public discussion about whether Germany is once again the ‘Sick man of Europe’. The Economist reintroduced the debate this summer more than two decades after its groundbreaking front page. The infamous headline seems currently justified when looking at the state of the German economy. The 'Sick man of Europe' debate The optimism at the start of the year seems to have given way to more of a sense of reality. In fact, the last few weeks have seen an increasingly heated debate about Germany’s structural weaknesses under the placative label “sick man of Europe”. Disappointing industrial data, ongoing problems in the energy-intensive industry and a long list of structural problems have fuelled the current debate. And indeed, no other eurozone economy is currently facing such a high number of challenges as the German economy. Cyclical headwinds like the still-unfolding impact of the European Central Bank’s monetary policy tightening, high inflation, plus the stuttering Chinese economy, are being met by structural challenges like the energy transition and shifts in the global economy, alongside a lack of investment in digitalisation, infrastructure and education. To be clear, Germany’s international competitiveness had already deteriorated before the Covid-19 pandemic and the war in Ukraine. To a large extent, Germany's issues are homemade. Supply chain frictions in the wake of the pandemic, the war in Ukraine and the energy crisis have only exposed these structural weaknesses. These deficiencies are the flipside of fiscal austerity and wrong policy preferences over the last decade. Fiscal stimulus during the pandemic years and last year to tackle the energy crisis have prevented the German economy from falling deeper into recession. However, with our current forecast of a contraction of the entire economy by roughly 0.5% over the entire year and yet another contraction next year, the economy would basically be back to its 2019 level in late 2024. There are many varieties of illness and the German economy has clearly caught a few bugs due to its own lifestyle choices.    

In the ever-evolving world of finance, recent developments have brought about significant changes in the banking sector. From historic profits to a shift away from remote work, these developments are reshaping the industry. Let's explore the key events that are making waves in the financial world.   Historic Profits at UBS One of the standout events in the financial sector is UBS's remarkable Q2 profit of $28.8 billion. This achievement can be largely attributed to the bank's acquisition of Credit Suisse, marking it as a historic milestone. This financial juggernaut's success underscores the importance of strategic acquisitions in the banking industry.   Return-to-Office Initiatives In a noteworthy shift, banks are taking a tougher stance on employees who prefer remote work. The era of widespread remote work, necessitated by the pandemic, is slowly coming to an end. Banks are now urging their staff to return to the office, signaling a return to pre-pandemic work norms. This change carries implications for work culture and the future of office spaces in the banking world.   Carbon Credit Market Uncertainty Confidence in the carbon credit market is waning. Carbon credits have been a vital tool in mitigating climate change, but recent events have raised concerns. As major players step back from the market, questions are being raised about its future effectiveness. The uncertainties surrounding carbon credits could have far-reaching consequences for environmental policies and sustainability efforts.   China's Economic Boost China, a key player in the global economy, is actively taking steps to boost its economic standing and strengthen its currency. As the world watches China's efforts to stimulate its economy, the implications for global markets are significant. The strategies employed by China could influence trade, investment, and currency dynamics on a global scale.   Airline Earnings Under Pressure The airline industry is facing headwinds as earnings outlooks dim. Factors such as rising fuel costs and economic uncertainties are impacting the profitability of airlines. As travelers cautiously return to the skies, airline companies are navigating a complex and challenging landscape.   NYC's Pension CIO Perspective In the realm of investment, the Chief Investment Officer (CIO) of New York City's Pension Fund provides insights into the impact of Wall Street's Environmental, Social, and Governance (ESG) pullback. Despite the recent trend of ESG considerations in investments, NYC's Pension Fund remains resilient, shedding light on the varying responses of institutional investors to ESG factors. The banking and financial sector is undergoing a period of significant transformation. UBS's historic profit, the return-to-office trend, carbon credit market concerns, China's economic endeavors, airline industry challenges, and the nuanced response to ESG factors are all contributing to a dynamic landscape. These developments not only shape the industry but also have broader implications for the global economy. As the financial world continues to evolve, staying informed and adaptable is key to navigating these changes successfully.    

Shipping costs up again and delays hit consumer markets in subsequent months Container vessels predominantly carry finished consumer goods, and semi-finished products are most impacted by the disruption. An estimated 30% of the world’s traded consumer goods are shipped through the Suez route. Higher transport costs obviously raise costs for shippers, but how they are affected depends on specific contracts although surcharges may hit them even if they have term-contracts. Shipping costs usually make up a small fraction of total sourcing costs per product. For lower valued or voluminous products this could, for instance, make up around 5%. If prices double or triple, this raises total costs by 5 or 10%, but we’ve also just gone through a prolonged downward cycle after the pandemic highs. Unless the current disarray lasts longer than expected, the impact on consumer prices may be limited (for now). Mounting delays of detoured vessels arriving in ports are resulting in increased uncertainty for shippers and handling pressures at terminals. Delays could also spark port congestion and hit the turn-around trip as well as connected journeys. The disruption leads to short-term mismatches between supply and demand and imbalances in the availability of vessels, personnel, and empty containers, and this needs to balance out again. With the Chinese New Year approaching and vessels returning to Asia too late, leading to cancellations. This will likely impact most of the first quarter and potentially the second quarter as well. For time-sensitive deliveries not yet underway, shippers may opt for shipment through the air, but this is much more expensive.    Altogether, this could mean some products will arrive later on the shelves if stocks are depleted, as companies like IKEA have warned about. In any case, questions about reliability lead to challenges in terms of fulfilling demand on time, and it reminds shippers that building resilience in supply chains remains vital.