Living in complex times

Posted by: Paul Donovan

18 Nov 2019
  • The data calendar is a barren wasteland of nothingness today. There is nothing to excite markets in terms of data releases. However, there are a number of central bank speakers plus the Bundesbank monthly report. With the increased focus on the German economy of late, that may be of interest.
  • The People's Bank of China quarterly report reported a "complex" external environment. Balancing concerns about economic activity were concerns about anchoring inflation expectations. Generally speaking, a country's consumers' inflation expectations are impacted by high frequency purchases like food. Food prices are behind the pick-up in Chinese inflation.
  • Sweden's Riksbank is the only major central bank expected to change policy in the near term, having criticized the use of negative interest rates recently. The Riksbank also criticized economic data quality (Sweden's unemployment rate has been revised down by almost 1%). Investors should not believe the precision of economic numbers.
  • There were "constructive" US-China trade discussions on Saturday. Apparently some members of the US administration actually work on a Saturday, or at least take phone calls.  This is not enough to excite markets. There is an assumption of a Phase 1 deal – the timing and the scale are what matter now.