Déjà vu 1992 (the 2014 remix) Part II
- Whether the pledge of "no capital controls" in Russia is deemed credible by markets or not, the crisis has lasting consequences. Russian government debt is low, but corporate debt is already trading as if sub investment grade, and usable FX reserves are less than might be thought.
- Greece's presidential election (first round) with the associated risk of a general election is today. Market concerns about contagion are not direct economic links (neither economy is very important globally and Russia's influence was already diminished by sanctions), but from investors looking for parallels.
- The US Fed takes its policy decision (it is already tightening quantitative policy) against this backdrop. We think markets overestimate their importance with policy makers and that the Fed will signal interest rate increases next year on the back of strong US fundamentals.
- US consumer price inflation is forecast 0.2% core (headline is oil affected) in month on month terms. Euro headline consumer prices are expected to be 0.3% year on year - a growth inflation not growth deflation force. UK labour data is due, and Japanese exports disappointed.
Listen to the audio version of this briefing.