Monetary Policy

Real estate, and in particular real estate investment trusts (REITs), was one of the first sectors to come under market scrutiny as interest rates rose, but a strong return to market from Swedish real estate company Heimstaden on Tuesday was the latest sign that expected rate cuts in Europe are easing pressure on the industry.

The European Central Bank (ECB) on Wednesday published its quarterly negotiated wages indicator for Q3, and while this is only one indicator the ECB uses to determine wage inflation across the Eurozone, the growth rate of 5.4% was the highest since the early 1990s.

The collapse of Germany’s ruling coalition just after the US election has left the Eurozone’s largest economy in political limbo at a difficult time.

With Donald Trump’s solid victory helping the dust around the US election result settle faster than many might have expected, investors’ attention has promptly shifted to the potential economic and financial market implications of the new administration.

In what has been a busy week for macro news in Europe, the latest round of data for the Eurozone delivered a surprise that could have implications for the European Central Bank’s (ECB) interest rate plans.

With the first Labour budget since 2010 dominating headlines, hallway conversations and family gatherings in the UK for the past couple of months, the stakes were very high indeed for the chancellor, Rachel Reeves, on Wednesday. Political opinions aside, the budget is usually an important event for market participants and this one was no exception.

With elevated yields and inflation expected to come back to target, we think investors can target a level of real return that was extremely difficult to achieve in the previous cycle.

Friday’s blockbuster jobs report saw a sharp sell-off in the government bond markets, with 10-year US Treasuries selling off by close to 15 basis points (bps), while the 2-year US Treasuries posted a 30 bps move in the same direction, dragging gilts and German bunds with them.

With cracks starting to show in the US economy, many are wondering whether tight corporate bond spreads leave investors vulnerable. But with corporate balance sheets holding firm and yields on higher quality bonds looking attractive, staying invested in credit should continue to reward investors.

Uncertainty is over, it was a 50 basis points (bps) move. As we mentioned in our previous blog, the most important take away from the Federal Open Market Committee (FOMC) meeting would be their assessment of the economy.

We struggle to recall a more eagerly awaited US labour market report than that published last week. Stakes were high given the previous report showed a steep rise in unemployment and caused market mayhem in early August, but anyone hoping for a conclusive picture was left disappointed as a mixed set of figures left the strength of the US economy open to interpretation.

In his headlining speech at the Jackson Hole Economic Symposium, Federal Reserve (Fed) chair Jerome Powell’s message to the market was clear.