Brexit, crecimiento en Reino Unido y EEUU y Petróleo

Julius Baer - Viernes, 27 de Enero

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ECONOMICS UK growth: Once again defying the Brexit Gross domestic product (GDP) data for the last quarter of 2016 presented yesterday beat analyst expectations and confirmed that the UK continues to shun a negative impact from the 23 June Brexit vote. Contributions to the overall 0.6% quarter-on-quarter increase were noted in particular in the services sector, which underpins the robustness of the UK consumer. Ironically, the strong contribution from business and finance services could be a drawback resulting from the Brexit, as investors and businesses begin to seek more guidance. Manufacturing, expected to profit from the weakness of the pound sterling, offered only a minor contribution of 0.1%. Looking forward, leading indicators suggest that momentum will remain strong also in the first quarter of 2017. Signals that the expected headwinds from the looming Brexit are approaching are yet ambiguous. Hiring recovered at the turn of the year, while investment intentions have remained modest but stable over the last few months. Nevertheless, the strong reliance of growth on consumption presents some risks: with surging inflation due to pound weakness, consumption will most likely experience some squeeze going forward.

So far, growth remains broadly unaffected by the Brexit referendum. Some vulnerability is visible with the strong reliance on private consumption. We continue to expect adverse Brexit effects later this year, once the negotiations are well underway.

 

David A. Meier, Economist, Julius Baer

 

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Solid US growth confirmed by GDP reading

 

We expect that US output grew by an annualised rate of 2.5% in the last quarter of 2016 compared to the previous quarter. Private consumption remains a solid contributor to growth in the US thanks to a solid labour market and wage growth. Overall growth in 2016 has been weak at 1.6% and entirely due to the poor start to the year. We expect growth to accelerate to 2.5% in 2017, slightly stronger than consensus expectations. Against this backdrop, further rate hikes and additional US dollar strength should constitute the path of least resistance. We stick to our expectations that the Fed will hike rates three times this year, 10-year Treasury yields could rise further reaching 2.9% over the coming months, the US dollar should appreciate further reaching USD/JPY 1212, and the EUR/USD should weaken to 1.03.

US GDP print confirms the solid growth backdrop in the US, allowing interest rate and the US dollar to rise further.

 

David Kohl, Chief Currency Strategist and Head Economist Germany, Julius Baer

 

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COMMODITIES

 

Oil remains stuck

 

Brent oil prices rose beyond USD 56 per barrel yesterday and we believe further upside is limited. The very bullish positioning by hedge funds in the futures markets suggests that there is lots of optimism about the fundamental impact of the producers’ pledged supply cuts. We remain sceptical and while we acknowledge the compliance by core members surrounding Saudi Arabia we see the temporary output curtailments as largely undoing late last year’s supply excesses. Moreover, the efforts are undermined by growing exports out of Libya, Nigeria and Iran, as well as the US shale boom which gained further momentum with the recent oil price bounce. The oil market is set to only marginally rebalance this year. Seasonally, demand remains soft and US storage should increase over the coming weeks. Our economists expect the Federal Reserve to deliver three rate hikes this year which should support the dollar and pressure oil and commodities generally. In brief, there is no shortage of possible fundamental triggers for profit-taking in the futures market.

We expect prices to drop towards and possibly below USD 50 per barrel, which in our view reflects the mid-point of a fundamentally justified trading range. Risks to our recommendation include unexpectedly full supply deal compliance, further supply hiccups in Libya and the Federal Reserve delaying rate hikes. Oil remains stuck at the upper end of a fundamentally justified price range supported by excessively bullish market sentiment.

 

Norbert Ruecker, Head Commodities Research, Julius Baer

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