Deficits, debt in The Monday Briefing

Climate change and the threat to financial stability

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Last month the governor of the Bank of England, Mark Carney, issued a stark warning about the impact of climate change: “If…companies and industries fail to adjust to this new world, they will fail to exist”. Mr Carney’s statement was co-signed by the chair of the Network for Greening the Financial System, a coalition of 36 central banks, including the People’s Bank of China. The Network helps central banks measure and mitigate the risks to the financial sector posed by climate change. Last month’s statement signals that climate change has well and truly arrived as an issue for central bankers.

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Posted on 07/05/2019

Deloitte CFO Survey: The dash for cash

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Today’s Briefing summarises the findings of the latest Deloitte Survey of Chief Financial Officers which was released overnight. The full report is available at: https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html

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Posted on 15/04/2019

Who’s afraid of the yield curve?

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There’s no doubt that growth in the West is slowing. The question is whether the slowdown could turn into a recession. Last month the US yield curve, a key gauge of future US growth, temporarily dipped into recessionary territory for the first time in ten years.

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Posted on 08/04/2019

Brexit latest and thoughts on a slower growth world

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With Brexit uncertainty undimmed we start this week’s Briefing with a short recap on the economics of leaving the EU.

The consensus among economists is that the UK will grow by 1.3% this year and 1.5% next year. With activity slowing across the world, particularly in the euro area, and the UK scheduled to leave the EU, growth at these rates looks pretty respectable. Given the uncertainties facing the UK it’s perhaps surprising that its economy is expected to outpace Italy’s or Germany’s this year.

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Posted on 18/03/2019

How to spot a bubble

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Last October the International Monetary Fund warned of the risk of another global financial crisis. The Fund sees a 60% rise in global indebtedness in the last ten years and the exposure of banks to illiquid assets as major risks.

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Posted on 04/03/2019

Laser-like focus on costs amid Brexit turmoil

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The latest Deloitte survey of UK Chief Financial Officers released today shows that uncertainty over Brexit is driving a marked shift towards defensive strategies among British businesses. With the UK’s growth prospects heavily dependent on the so far uncertain nature of its exit from the EU, corporates are cutting back on capital expenditure and hiring. Cost reduction is the top priority for CFOs who are placing a greater emphasis on it now than at any time in the last nine years.

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Posted on 04/02/2019

Is there a borrowing bubble?

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A boom in low quality mortgage lending in America triggered the Global Financial Crisis. It was a crisis of indebtedness which, courtesy of low interest rates, quantitative easing, government spending and bank bailouts, was resolved by the accumulation of even more debt.

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Posted on 28/01/2019

Who made money in 2018?

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Last year was a tough one for investors, with global equity markets falling 10% overall. For UK investors most major asset classes – equities, bonds and residential property – either fell in value or saw only small gains.

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Posted on 07/01/2019

Recessions always start out as downturns

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Slowing growth in Europe and emerging markets and October’s equity sell off have got economists pondering when the next recession might strike.

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Posted on 12/11/2018

Downs and ups in equity investing

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It ended on a high note last week, but overall October was a rotten month for equities. The world equity market has just had its worst month since 2012, with the benchmark MSCI world index down 7% in October. This fall has more than reversed earlier gains, leaving the global index down 3% so far this year.

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Posted on 05/11/2018