Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 25 July 2016 at 9:30 GMT

Daily Shot: How the UK and EU economies reacted to the Brexit vote Team / Saxo Bank
  • Data hints at the UK risking stagflation after Brexit led to a depreciating GBP
  • Disinflationary pressures seem to be back in Iceland and elsewhere
  • Japanese data is raising some hopes for a recovery in GDP growth
By Walter Kurtz*

1. We begin with the United Kingdom where the latest Markit PMI report shows the nation's economy hitting a wall.

2. Moreover, factory input prices seem to be rising at the fastest pace in four years (as a result of the pound devaluation). Is the UK facing stagflation? 
factory input prices
3. Here is the British pound's reaction to the Markit report on the UK's economy. 
Speculative accounts have been positioned for this move in the British pound. The question now is whether the short pound bet is becoming a crowded trade. The August BoE rate cut expectations rose after the disastrous PMI report. Given the speculative accounts' positioning, the GBP reversal will get ugly if the BoE disappoints next month.
1. The Eurozone economy was "surprisingly resilient" to Brexit thus far, according to Markit.
2. In particular, German private sector growth hit a year-high in July, beating forecasts.
3. Nonetheless, the ECB growth expectations for the Eurozone have been downgraded.
Elsewhere in Europe, Iceland's disinflationary pressures seem to be back - a trend that persists in a number of European economies. 
Norway's government has been tapping the nation's massive sovereign wealth fund as energy prices remain low. 
Two brief comments on Japan:
1. Japan's June exports declined less than expected, raising some hopes for a recovery in GDP growth.

2. Nintendo declined 16% this morning after its comment on Pokemon Go.
Switching to the credit markets, here are the high yield default cycles compared to the current trend.  
The next chart shows the diverging cost of equity vs. debt financing which contributed to a significant divergence between bond and IPO issuance. 
debt financing
Turning to Food for Thought, we have 3 items today:

1. US hospital admission rate for congestive heart failure for select nations. 
2. Which tech company gives out the most stock option awards to its employees as a percentage of total revenue? 
3. Has Pokemon Go "peaked"? Here are the daily US users this month (mm). The numbers are still staggering for a single game. 
Pokémon Go


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