Why is the euro starting to trend lower?

Posted on 22. Jul, 2014 by Jean Jacques Ohana in Weekly Focus

We have anticipated the euro’s strength for more than a year against the consensus.
The main forces behind the euro’s strength are still at work:

Current account in the Eurozone is still progressing due to uncooperative and simultaneous policies of competitiveness. The Eurozone current account is nearing 3% of GDP, implying recurrent repatriation of foreign currencies by [...]

Increase in equities + decrease in yields: what is behind this joint dynamics?

Posted on 03. Jun, 2014 by Jean Jacques Ohana in Weekly Focus

Since the start of the year, interest rates drifted lower including in core sovereign debts (US, UK, Japan, Germany) while global equities rose. As a matter of fact, the US 10 years rates dropped around 50 bps, the German 10 years Bund rate tumbled 60 bps whereas the MSCI World index increased by 3.3% before [...]

Long Bonds and long Equities altogether

Posted on 10. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

As liquidity comes back to risk seeking territory (figure 3), equities are likely to rise again but surely less than in 2013.

Nevertheless, the uncertainties about the emerging countries’ outlook will weigh on financial markets and deteriorate the global economic outlook. As a matter of fact, Chinese authorities will maintain a tightening mode in liquidity so [...]

Playing the Eurozone disinflationary trend

Posted on 03. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

The current emerging markets rout happens at the worst moment for Europe. As Eurozone countries have made the choice to export their way out of debt, they have made themselves increasingly vulnerable to the growth prospects in emerging economies.

The ongoing landing of the Chinese credit bubble and the sudden stop experienced by emerging countries running [...]

Are you so sure that interest rates will rise in 2014?

Posted on 20. Jan, 2014 by Jean Jacques Ohana in Weekly Focus

Judging from the trends on sovereign bonds, the Radar is increasingly constructive on bonds (figure 1) beyond corporate bonds where we have maintained a positive view since mid-2013. Besides Italy and Japan, Canadian and French bonds are flipping to positive trends while the dynamic of US and UK sovereign debts is improving.

The situation in Canada [...]

Reading the 2014 financial scenarios through the lenses of 2013

Posted on 30. Dec, 2013 by Jean Jacques Ohana in Weekly Focus

A bird’s eye view of 2013 History will help us design some financial scenarios for 2014.
The main financial event of 2013 has been the remarkable decline in financial integration (figure 1) which translates a greater confidence in the financial system. Equities of developed countries have steadily risen whereas emerging markets have tumbled. Commodities-linked currencies have [...]

Financial consequences of the ECB’s impotence

Posted on 09. Dec, 2013 by Jean Jacques Ohana in Weekly Focus

Before the last ECB meeting, we could wish that several ECB council members were determined to fight the deflationary threat in the Euro zone southern countries (figure 1). For instance, the last surprise move of the ECB refi rate down to 0.25% seemed to show that the ECB wanted to move towards a proactive quantitative [...]

The rebirth of Japan: hold Japanese stocks

Posted on 28. Oct, 2013 by Jean Jacques Ohana in Weekly Focus

The most important achievement of Abenomics thus far is probably the turnaround of public debt dynamics.

This has not been achieved by austerity (the path taken by the Eurozone, with little success so far) but by increasing the gap between nominal growth and interest rates. Namely, the fiscal and monetary stimuli have raised real growth and [...]

Three reasons supporting a strong euro

Posted on 12. Aug, 2013 by Jean Jacques Ohana in Weekly Focus

Even though the dollar has been strong vs. emerging currencies and commodity currencies, the euro, since the beginning of the year, has recently been even stronger than the dollar (figure 1). The consensual “bear euro” view has failed to materialize. This prediction, which is based on the premise that the euro depreciation would be the [...]

Can Italian rates still be pushed higher?

Posted on 22. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

In the past weeks, it has become hard to envision a scenario that could cause peripheral rates to go up. However serious the political gridlock in Italy, however gloomy the growth prospects in Europe, however nervous the commodities and stock markets, the downside of Euro zone peripheral debts could never materialize.

We have observed [...]