Head of Macroeconomic Research
Summary: As European consumer confidence wilts, more and more problems are being revealed across the Eurozone economy. The signals are not good and Germany is the most worrying flashpoint of the lot.
Chinese growth leads Eurozone growth momentum
However, there is something more than political risk, Germany’s surprising GDP drop and low credit generation behind the recent slowdown. A key driver may lie elsewhere…in China!
Below, we plot German IFO manufacturing and the Li Keqiang Index, which is a reliable indicator of China’s growth (chart 6). We notice very well that China’s growth momentum leads German IFO manufacturing. This is not surprising considering that Germany is one of the rare main European countries to enter massively the Chinese market. All the credit data since past May tend to confirm that China has decided to open the credit trap to offset the negative impact of the trade war. Nonetheless, the stimulus remains too limited, and even if it were not, it would take several months or even quarters before having a positive effect on the German economy.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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