Perspectives Blog

Is Europe heading for Japanese-style deflation?

Martin Harvey, Fund Manager, Threadneedle International Ltd | August 4, 2014

n and Ireland, this was not the root cause of the problem. Initially, it was Europe’s exposure to global trade that caused a steep drop in economic activity in the wake of the Lehman collapse, while the onset of the sovereign debt crisis later played a part. The scale of the initial drop in the Eurostoxx index was similar to that seen in Japan in the early 1990s (Exhibit 1). On the surface, it appears that the Europeans are adopting correct polic…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….

Comments on the effect on global markets from the Ukraine crisis

Mark Burgess, Chief Investment Officer, Threadneedle Investments | March 12, 2014

To date, the fallout from the Ukrainian crisis has been largely confined to the emerging market debt, emerging market equity and commodity markets. At current levels, emerging market local currency debt appears to offer value, although we expect both the hard and local currency markets to remain volatile in the short term. Emerging equities reflect concerns not only around Russia and Ukraine but also the weaker growth outlook in Brazil and China…

Quality milestone in the European recovery story

March 17, 2014

Index*; last time round this presaged a capital expenditure and M&A boom in Europe. Exhibit 2: Eurozone non-residential capex as a share of GDP Source: JP Morgan Equity Strategy, December 2013 An increase in average net debt/EBITDA to 2x from the current 1.6x would provide €400 billion of firepower for growth. As with U.S. corporates, the short-term focus is likely to be on share buybacks and dividends rather than increasing capex. But in a…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

only about 7% of total banking sector assets. Another shadow banking product is wealth management products issued by banks at Rmb10trn, less than 10% of bank’s total deposit base. • China has only 10% of gross external debt of gross domestic product (GDP), almost the smallest among all emerging countries. That means debts are largely domestically funded, and by adding in all forms of non-loan and off-balance sheet credit, the resulting ban…

European equities – Should investors care about periphery vs. core anymore?

Dan Ison, Portfolio Manager | January 13, 2014

ore than 33% for the year) were Greece, Finland and Ireland. Of the larger markets, Germany, The Netherlands and Spain were the best performers while France, UK and Italy were the worst. Four years since the start of the Euro Crisis (Greece late 2009), can we finally stop worrying about the periphery versus the core?  Year-to-date performance (in euros) Source: Threadneedle International Limited*, December 2013. Past performance does not gurante…

Ukraine Crisis – Can the U.S. make Europe less dependent on Russian gas?

Jonathan Mogil, Portfolio Manager and Senior Analyst | July 28, 2014

…s via Ukraine is more manageable today than in the past, many countries including Greece, Hungary, Bulgaria and Slovakia remain extremely vulnerable to any disruption in Russian exports. Russian gas continues to flow to other European countries through Ukraine, but supplies for Ukraine’s own domestic use were cut off in June. Europe’s mild winter last year left natural gas storage levels at historically high levels, and as a result European price…