August, 19 2016 by lsr team

In previous notes we have stressed how important supply-side rebalancing is for the success of China’s demand side revolution. Beijing’s longer-term intention is clear: it aims to proceed with supply-side reforms.  But what would happen to the labour market if Beijing went for a full blown, Austrian-style rebalancing of the supply side? What if they allowed failures to go under and ailing firms to restructure in a market-oriented way? How many jobs would be under threat from such a process? Click above to watch the full video or below for the full report...

June, 30 2016 by lsr team

The UK voted last Thursday to leave the EU. So far at least, market reaction to the news hasn’t been anywhere near as violent as the doomsday predictions before the vote implied. There is little evidence of either liquidity stresses or contagion so far. We believe that the imminent risks of contagion may be quite limited as, unlike in 2008, there is no major drying up of liquidity to force a widespread liquidation of risk assets. To find out more about Brexit’s market implications and our views, click above to watch the video or below for our latest Macro Str...

April, 07 2016 by lsr team

We held a client seminar on the economic impact of Brexit in June 2015 – as always at LSR we like to be well ahead of the curve! As we stated then, the longer term implications of a vote to leave are likely to be small in either direction. However, since the middle of last year our concerns about the immediate impact of the referendum have been amplified by the declining household savings rate. With consumer demand closer to the end of its own cycle, any investment disruption will be keenly felt. Our senior economist, Richard Batley discusses Brexit and its impact...

August, 27 2015 by lsr team

As we approach the crucial September Fed meeting, the debate about whether the Fed will/ should raise interest rates has intensified.  Even before the recent drama in global markets, a clear split had emerged on the FOMC about whether it was time to attempt lift-off. Now, domestic US data still justify a move, but jittery markets and the slowdown in China, which will intensify global goods deflation, suggest it might be prudent to wait a few more months. The decision looks finely balanced and might come down to how markets behave over the next few weeks. Our report...

August, 26 2015 by lsr team

The market has focused its attention on the People’s Bank of China’s (PBoC) interest rate and RRR cut. But more importantly, we also saw another move by the PBoC that reinforces its commitment to allowing the market to play a bigger role. The central bank scrapped the ceiling on rates for deposits of more than one year. This follows the change in the exchange rate regime announced on August 11th, in conjunction with a 1.9% depreciation of the renminbi, aimed at nurturing a more market-driven currency. What does this mean for China and its currency? Click belo...

August, 24 2015 by lsr team

The yuan devaluation has set in motion a chain of events that ultimately resulted in the current selloff in global risk assets. Emerging markets, already underperforming for much of the past few years, took the first hit. The liquidation is now spreading to developed markets, with most equity indices down more than 10% in under a week. Market volatility should not be a surprise at this stage of the cycle. As the chart above shows, rich valuations tend to correlate with deeper and more frequent market gyrations. What is it then that explains the violence in market moves t...

July, 02 2015 by lsr team

All eyes are on the unfolding Greek drama, yet arguably what is going on in China is of equal if not greater importance for markets. China’s stock market has the blessing of the ruling Communist party, but this doesn’t mean equity prices can’t swing violently. Beijing would rather see money pouring into shares than inflating a new property bubble that could burst with potentially more severe social consequences. Yet it does not want a re-run of the market’s collapse in 2008 either – hence the recent crackdown on margin trading that set off t...

June, 12 2015 by lsr team

China’s stock market is piping hot with the A-share market up nearly 60% this year. But China’s economy has lost momentum sharply, with real GDP falling by 0.2% in Q1 according to LSR estimates, the worst since the global financial crisis. Our Chief Economist and Head of Research, Diana Choyleva talks about the two opposing forces and why it’s important for the Chinese authorities to support the equity market. Click here if you're interested to watch the full video on CNBC or...

June, 10 2015 by lsr team

The German 10-year Bund yield rises above 1% for the first time since September as the selloff in German sovereign debt continues. Our Chief Economist and Head of Research, Diana Choyleva explains the dynamics behind the bond market selloff and when we expect the first Fed rate hike. Click Read more where you'll be directed to watch the full video.