Julius Baer_Comentarios: Jackson Hole, Renta Fija, Materias Primas (petróleo)

Redacción - Lunes, 28 de Agosto

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ECONOMICS Jackson Hole: Draghi offers little information Contrary to 2014, when European Central Bank (ECB) Governor Draghi paved the way for asset purchases, the Jackson Hole symposium this year was not a venue for central bankers to announce shifts in monetary policy. However, after the key speeches by Draghi and the Fed’s Chair Janet Yellen the euro went higher. Why? Although Draghi’s luncheon address did not cause the breadcrumbs to stick in his listeners’ throats, he reassured that there will eventually be an end to the ECB’s asset purchase programme, albeit slow as inflation is still lagging. Furthermore, Draghi did not issue any concern about the currently strong euro levels. Yellen’s Friday morning speech, titled “financial stability a decade after the onset of the crisis”, however, fully avoided any discussion on the Fed’s monetary policy, such as the continuation of rate normalisation or the suggested balance-sheet reduction. Leaning on little information compared to none, markets sent the euro beyond EUR/USD 1.19 again. We continue to believe that euro strength expresses exaggerated expectations on ECB monetary policy normalisation, while we continue to expect a next Fed rate hike in December, based on cyclical strength and a recovery in inflation. A side note on Jackson Hole: Both Draghi and Yellen had praised the efforts of policymakers around the globe to improve financial regulation, limiting the probability and adverse consequences of future financial crises. Both had stressed that deregulation would be dangerous in times where global monetary policy remains very expansive. This probably did not win Yellen any sympathy from President Trump, which could question further her chances of being re-elected as Fed Chair once her term ends in February 2018.

Although forex markets leaned on the euro’s side, we stick to our view that speculation on an early normalisation of ECB monetary policy is premature. Furthermore, with stronger inflation ahead, Fed funds rate hikes are likely to continue. Euro-euphoria could ebb off while higher rates support the dollar.

 

David A. Meier, Economist, Julius Baer

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FIXED INCOME

 

Government bonds: only theoretical elaborations in Jackson Hole, eyes on US labour

 

The eagerly awaited speeches of Fed Chair Janet Yellen and the President of the European Central Bank, Mario Draghi, at the central banker conference in Jackson Hole did not yield any hint on their next monetary decision. Janet Yellen used the platform to argue against any material watering down of macro-prudential measures to contain systemic risks in the US financial system. In her speech, she warned that any relaxation might result in the “all-too-familiar risks of excessive optimism, leverage and maturity transformation”, which is the Fed description of a financial bubble. While the conflict of interest between the Fed and the Treasury Secretary Mnuchin, who is engineering a revamp of the Dodd-Franck-Act on US banking regulation, will be smoldering in the background for some time, the bond market will focus on the August inflation readings for the eurozone inflation readings due on Thursday and the US labour market report due on Friday. Any material acceleration of eurozone headline inflation or US wage growth would be negative for bonds.

 

The fact that Yellen refrained from announcing a balance-sheet reduction on Friday does not mean that it is not coming. We maintain our call for money market instruments until corporate bond yields have reached a better level. The debate on the ECB’s need and room to act will not cease, meaning that we will be sticking to our call to avoid segments the ECB has distorted with its excessive purchases, and we shall focus on subordinated debt of solid banks for the time being.

 

Markus Allenspach, Head Fixed Income Research, Julius Baer

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COMMODITIES

 

Oil: Energy markets ponder Harvey’s impact

 

Energy markets are pondering the impact of hurricane Harvey, which hit the heartland of the US energy business over the weekend. Crude oil prices have remained stable so far in today’s early morning trading but gasoline prices have surged almost 7%. The price reaction reflects the initial assessment where refineries are reporting more meaningful outages than Gulf of Mexico oil production sites. While the storm related damage seems manageable, the continued rain and floods bring everyday life in southern Texas to standstill, which likely will bear broader economic consequences felt beyond energy markets. Crude oil and oil product inventories are ample and should be able to weather the temporary refining and gasoline supplies outage. Especially given that the floods regionally curtail oil demand. Historically, storm related prices moves have been temporary and short-lived. The crucial balancing element is ports and the resumption of crude oil and oil product trade. Only if trade disruptions are more severe, energy prices should see a more lasting impact. We maintain a neutral view on oil and see prices trading sideways spending more time in the high 40s than the low 50s. The driving season wraps up and oil demand is set to decline over the coming weeks. This seasonal soft patch should move back in focus in Harvey’s aftermath. Elsewhere, the central banker symposium in Jackson Hole was the expected non-event and so far shows marginal impact on gold prices.

 

Hurricane Harvey hit the US energy heartland and brings economic activity to standstill. Despite the meaningful outages energy prices should see no lasting impact. We maintain a neutral view and see oil prices trading sideways as growing shale output and stagnant western world oil demand undermine the Middle East’s supply deal.

 

Norbert Rücker, Head Macro & Commodity Research, Julius Baer

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