Les vacances sont terminées pour les décideurs politiques
- The announcement of more fiscal stimulus contrasts with the emergence of disciplinarian noises here and there. The debate on tax hikes in the UK reflects idiosyncratic stress as the probability of no-deal Brexit is rising.
- The debate within the European Central Bank on its policy stance in the face of currency appreciation and signs of deflationary pressure is also heating up, even if we don’t expect hard decisions this week.
- Within emerging markets, we look at Turkey with particular concern.
By and large the dataflow continues to point upward for the global economy but as we expected the spectacular rebound of early summer is not sustained, with private sector job creation slowing down in the US and the Euro area PMI moderating. It is not surprising in this context to hear more on fiscal stimulus beyond the emergency response of the last few months, and France last week unveiled its own pluri-annual support package.
Some “disciplinarian noises” are emerging though. While Jens Weidmann’s fiscally hawkish speech last week probably does not have immediate consequences on policy-making, the debate on tax hikes is heating up in the UK and becoming more tangible. This is probably idiosyncratic to this country though, as it reflects unease in some segments of the British leadership with the status of the UK in international markets post-Brexit. On this front, the news-flow is concerning and unfortunately the probability of “no deal” is rising.
The ECB – through the voice of its chief economist – clearly welcomes additional fiscal support. Still, we continue to think that the central bank will have to extend in size and duration the Pandemic Emergency Purchase Programme, although we expect such announcement only by year-end. This week, we think Christine Lagarde will echo Philip Lane’s comments and acknowledge the euro appreciation as another headwind but without taking immediate action. The next steps will be politically delicate for the central bank.
During the Great Financial Crisis of 2008-2009, central banks in emerging countries had not been able to immediately engage in monetary easing along the Fed and their other DM counterparts. This time they did, and the “risk on” mood of the spring, bringing a measure of capital flows back to EM, has seemingly validated their approach. Risks continue to abound though, even irrespective of the pandemic, while capital flows have been plateauing for some time now. We continue to look at Turkey with particular concern.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
In the UK, this document is intended exclusively for professional investors, as defined in Annex II to the Markets in Financial Instruments Directive 2014/65/EU (“MiFID”). Circulation must be restricted accordingly.
© AXA Investment Managers 2020. All rights reserved