Europe

Despite the ECB's recent review bringing some previously debated points surrounding AT1s to the forefront, we believe any changes would create undesired, real-world consequences if implemented.

Growth in 2022 is likely to be above historical averages for most developed economies, even after adjusting forecasts for the impact of the Russian invasion.

Officially the Fed pivoted from its ‘transitory’ inflation rhetoric in December last year.

Soaring inflation was already a dominant theme for markets coming into 2022. The sanctions imposed on Russia in response to its invasion of Ukraine have only exacerbated its expected rise, and pushed its expected peak further out.

We think a base case that central banks will follow a more measured monetary policy path than markets are currently pricing in is reasonable given the current backdrop.

Default rate estimations depend on how you define defaults and what index you use, but there is no doubt we are at record lows in European high yield at the moment.

European bank equity has been among the hardest hit sectors since Russia’s invasion of Ukraine, as fears of losses and a flight to quality have prompted investors to change positioning.

Yield curve shape and yield curve change are often good predictors of the state of the economy and its outlook.

As 2021 wore on we became increasingly concerned that the disconnect between asset prices, economic fundamentals and monetary policy was becoming more acute.

Yesterday was a noisy day for the Bank of England (BoE) and European Central Bank (ECB), usually an undesirable situation for market participants.

If 2021 was a bad year for global bond returns, it follows there were few natural shelters to be found within fixed income from the brunt of inflation and rates-driven volatility; the Barclays Global Aggregate Index (a widely used broad measure of bond performance) returned -4.7% in USD terms, while European investment grade credit returned -1.1% despite credit spreads tightening over the course of the year.

Électricité de France (EDF) shares fell by as much as 25% on Friday morning after the French government announced exceptional measures to limit the impact of high electricity prices on French consumers, at the expense of the energy provider – the shares are down over 30% since start of December.