1-Year Chart of the XHB ETF
Mario Draghi on the Pros and Cons of the EU Outlook
On the positive side, incoming information continues to point to the euro area economy being resilient to global and political uncertainty, notably following the UK referendum outcome. The initial impact of the vote has been contained and the strong financial market reactions, such as equity price falls, have largely reversed.
At the same time, the substantial weakening of the foreign demand outlook since June is expected to dampen export growth. Along with other factors, it will continue to pose downside risks to the euro area’s growth prospects. According to the September ECB staff macroeconomic projections, annual real GDP growth is expected to increase by 1.7% this year, and by 1.6% in each of the next two years.
Latest Markit Numbers
OECD Report on Trade
Over the past few years, the rate of global trade growth has halved relative to the pre-crisis period, and it declined further in recent quarters, with the weakness concentrated in Asia. While low investment has played a role, rebalancing in China and a reversal in the development of global value chains could signal permanently lower trade growth, leading to weaker productivity growth. Lack of progress – together with some backtracking – on the opening of global markets to trade has added to the slowdown.
BOJ Head Kuroda's Observations On the New BOJ Policy
The first point is that, during the three years since the introduction of QQE, Japan's economic activity and prices, as well as financial conditions, have improved substantially, and Japan's economy is no longer in deflation.
The second point is that, despite such a positive turnaround, the price stability target of 2 percent has not been achieved.
The Bank has come to the conclusion that it can facilitate the formation of a yield curve, which is deemed most appropriate for achieving the price stability target of 2 percent, through the appropriate combination of a negative interest rate and JGB purchases.
The fourth point is the impact of monetary easing on the functioning of financial intermediation...Although the direct impact of these developments on economic activity as a whole is unlikely to be substantial, it is possible that such developments can cause uncertainty regarding the sustainability of the financial functioning in a broad sense, in that they could have a negative impact on economic activity through a deterioration in people's confidence. In facilitating the formation of an appropriate yield curve, the Bank should take account of these points.
Dallas Fed on August's and September's Economic Numbers
Economic indicators released in August and September have been mixed. Consumption spending got off to a strong start in the third quarter, and employment growth slowed but remains solid. However, the more timely purchasing managers’ surveys were unusually downbeat. Still, forward-looking indicators and professional forecasts point to stronger growth in the second half of the year. Inflation remains muted and below the Federal Reserve’s target rate of 2 percent, with goods and services inflation exhibiting differing trends.
