Tatton Weekly: Central Banks – None the Wiser; Unwinding of QE – first appearance on the horizon; Eurobonds on the horizon?; China’s capital markets door opens – a little – further; Change in stock selection dynamics lurks beneath the ‘technology tantrum’

Central Banks – None the Wiser

While politics and another desperately sad case of corporate man-slaughter dominated UK news, economics at home and abroad were dominated by central bank policy action, in-action and signs of rate setting committee dissent.

 

Unwinding of QE – first appearance on the horizon

While there were no real surprises in this week’s policy announcements from the European Central Bank (ECB), the US Federal Reserve (US Fed) or the Bank of England (BoE), there is still uncertainty about the relative strengths and weaknesses of the economic data in each case, and, as result, uncertainty about the future direction of monetary policy in all three.

 

Eurobonds on the horizon?

This week, Spanish finance minister Luis de Guindos has called for major reforms within the Eurozone, including the creation of a European treasury or monetary fund with the power to decide over a percentage of national budgets. According to Mr Guindos, “There is a pervasive perception that there are flaws in the Eurozone that we have to correct.”

 

China’s capital markets door opens – a little – further

This week, the IMF surprised by raising its 2017 growth forecast for China from 6.6% in April to 6.7%. It wasn’t just positive regarding economic data but noted positively that China is reigning in risky lending and rising debt levels from the shadow banking sector. In the regulated banking sector bank loans surpassed expectations in May. Nevertheless, according to the central bank (People’s Bank of China – PBoC) the shadow banking market deleveraging took its toll, leading to the slowest rate of money supply growth in 20 years. Although this followed an exceedingly positive first quarter for 2017, the slowing of money supply has many – including us – worried what the 2nd calendar quarter may bring.

 

Change in stock selection dynamics lurks beneath the ‘technology tantrum’

Global technology stocks have experienced a sharp sell-off, or ‘tech tantrum’, over the past week, and tech shares took another hit following the US Federal Reserve’s decision to raise interest rates for the second time this year.

 

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