Macro Matters – November 2020

(Source: Merlea Macro Matters)


The world economy is experiencing a tepid, uneven, and fragile recovery from the depths of the COVID-19 recession. The latest update of the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) reveals pockets of strength in particular economies, but a broad-based and robust recovery does not appear on the horizon.  China’s economy is back on track and the United States appears to have turned the corner, while many other economies fall to new depths. As they struggle to contain the virus, with a second wave gripping much of Europe and a third wave in the US, the risks of substantial and long-lasting scarring effects on economies are rising. Private sector confidence has been battered, which does not bode well for business investment and employment creation.

However, there are some positive omens. World merchandise trade has rebounded strongly, consistent with indications of a revival in household demand for goods in many economies even as the demand for services remains hobbled by restrictions and consumer concerns. Financial markets have held up surprisingly well, with stock markets in many countries recovering close to or even exceeding their pre-COVID levels. Even with near-zero interest rates, banking and financial systems seem mostly stable. Oil prices have recovered somewhat, while prices of other commodities have been buoyed by consumer and industrial demand.

Major central banks have pulled out all the stops in supporting economic activity and, in some economies, also trying to fend off deflation. They have been using not just unconventional monetary policy but, in some cases, even adjusting their policy frameworks to signal tolerance of higher inflation. Even the central banks of some smaller advanced economies such as Australia and New Zealand as well as emerging market central banks such as the Reserve Bank of India have resorted to unconventional measures. The limits to any type of monetary policy in supporting growth are, however, becoming increasingly apparent. Central banks are in danger of increasing entanglement in their economies through purchases of corporate and government bonds and direct financing of firms, which could leave them vulnerable to political pressures and threats to their independence in the future.

Governments have little choice but to invoke further aggressive fiscal stimulus, even though this may come on top of already high public debt levels. But this must be compared against the risks of even greater and long-lasting scarring of economies in the absence of such stimulus. The global low interest rate environment will limit interest payment burdens, and, rather than crowding out private investment as in normal times, well-targeted government expenditures could serve as a catalyst.  To be effective, however, these measures will need to be complemented with coherent virus containment strategies that allow economies to reopen safely. Concerns about ineffectual management of the virus’s spread seem to be a dominant factor holding back a revival of demand and confidence.


Conventional government bond investments, with their inherent interest rate duration exposure, have long been the defensive anchor of choice for multi-asset investment portfolios seeking a balanced risk profile. That approach is no longer optimal. Ultra-low yields fundamentally change the risk vs. reward proposition of government bonds and therefore challenge conventional assumptions about the defensive role they are supposed to play in a broader portfolio. With the starting point of government bond yields already close to zero, duration can no longer provide the same upside to offset equity losses that it used to. Even worse, duration exposure has become much riskier, as its risk vs return profile has become unfavourably asymmetric.

Amid unprecedented fiscal and monetary policy support, the positive environment persists based on the strong assumptions of low rates forever and no inflationary pressure. It is true that the sequence in the coming months could be deflationary to begin with, but recovery is under way, thanks especially to China (and other Asian economies) that is further reinforcing its role as the global growth engine. Within this backdrop, equity, credit and Euro peripheral debt markets are responding well. However, in government bonds, volatility has been rising. The yield on USTs moved slightly upwards, from 0.65% at end-September to c.0.8% on 26 October. The anticipated curve-steepening has started. This is an early indication of the next sequence, in which the low-rates-forever mantra would be challenged. The bond market is factoring in a Biden presidency and his likely fiscal boost, which could be triggers for next phase. The availability of a vaccine would be part of this recovery: markets are pricing in availability in mid-2021 and then an economic reacceleration. Any delay could generate volatility, putting the virus cycle once again at the top of market concerns. Investors should look at opportunities from rotation, while also being mindful of possibly higher volatility. Bonds will be the key sentinels for the next phase. The market will likely start pricing in higher inflation and reflation, leading to the next sequence.

Although we have seen downgrades in credit markets this year, most of those have occurred in sectors that we were expecting, like the energy and retail sectors. We do think in the high yield, more distressed areas, default rates will start to pick up as “zombie” companies that have thus far been supported by government policies, start to fail. In our view, investment grade credit still offers opportunities and high yield distressed credit is becoming much more attractive.

Listed Property

While Australian listed property stocks, or A-REITs, have gone through a challenging period during 2020, most are currently performing well and offer investors an attractive opportunity for income yield.  During the latest reporting season, most A-REITs did not provide much future guidance which is unusual, but this was more a result of the challenge in predicting the short-term future rather than any specific concerns about the property groups.  Indeed, A-REITs outperformed the broader Australian equity market during reporting season, returning 8% (compared to 3%) in August 2020 and this outperformance continued through September. Overall, balance sheets across the sector are in good shape and within covenants, with increased available liquidity. As investors, our focus is now more on the income trajectory.

One of the key concerns about A-REITs during the lockdown was the impact it would have on rent collections and income. Across the sector, rent collections have varied. The most impacted were large scale and CBD-based retail A-REITs while sectors such as office, industrial and other subsectors were less affected.

Now, with the COVID-19 lockdowns relaxing across Australia, stores are opening, and foot traffic is returning, and this is leading to an acceleration in rent collection. Encouragingly, despite the drop in rent collection, income yield across many A-REITs has remained strong and, as the situation improves, we see the potential for good upside in income yields. In fact, in some cases, distributions are back to the same levels they were before the COVID-19 outbreak. In our view, some stocks at such extreme levels are over-extrapolating the ‘stay at home’ theme, whereas the reality is that there will be a return to normality as COVID-19 runs its course or when a vaccine is rolled out.

A lot of investors are sitting on sidelines with their cash on hand waiting for REITs to drop back. Unfortunately, you might be waiting for a long time, possibly forever. Anything can happen in the short run, but those who buy today and remain invested will likely beat those who try to time the market.

Therefore, we are positioning for the recovery trade, and there are some strong and compelling opportunities in real assets, which are out of favour now that will benefit from the return to normality. We are also seeing some good opportunities in alternative real estate, such as land lease communities, storage, and childcare centres – which are currently a good source of income, diversification, and re-rate potential. However, we believe it is important to not overlook traditional core real estate in the A-REIT sector because that’s where investors can find the deepest value and some real opportunities in the current market.


The COVID crisis has created a very significant divergence between winners and losers in the market. Individual stock selection is always important, but it becomes critical when you get such stark divergence. Strong performing sectors were technology, consumer staples, healthcare, resources, and consumer discretionary. Weak sectors were financials, industrials, energy and telcos. Dividends were also a key theme through reporting season. Approximately 60% of companies reduced their dividend or eliminated it all together, with remaining companies split between maintaining their dividend and some even growing dividends. Market earnings were down on average 20% with banks (-30%) and industrials (-25%) being the key negatives. Property was only slightly down while resources remained flat. Resources have been one of the cheapest sectors, with strong cash flows and excellent balance sheets. They will benefit from the fact that China was the first in and out of the pandemic.

Australian data was mostly good. While the trade surplus surprisingly weakened in August this reflected a fall in exports due to a sharp fall in gold exports which can be volatile and a recovery in imports which is consistent with stronger demand in the economy. Meanwhile business conditions and confidence improved in September according to the NAB business survey, job ads rose again in September and payroll jobs rose over the two weeks to 19th September suggesting the payroll jobs recovery may be resuming after a flat period since July due largely to Victoria.

Australia is continuing to see new local coronavirus cases remain very low at around 20 or less a day with few cases of community transmission and deaths have fallen sharply. This has enabled Victoria to substantially relax its hard lockdown enabling all shops and activities to return albeit with restrictions on groups. Australian Economic Activity Tracker rose only slightly over the last week but is likely to accelerate higher following Victoria’s significant reopening in the past week.

Housing finance commitments surged another 12.5% in August with owner occupiers and investors seeing strong increases and an 18% rise in finance for first home buyers. The surge in housing finance partly reflects a catchup to the low processing of loans in April and May but is also being driven by record low rates and various incentive schemes and is occurring before the removal of responsible lending rules. The surge in housing finance taken in isolation points to a potential surge in house prices. Working against this though are a likely increase in distressed sales as bank payment holidays and various income support measures end and the huge reduction in underlying demand flowing from the collapse in immigration. The RBA’s latest Financial Stability Review noted that the Australian financial system can withstand the downturn and support the recovery, but that “business failures will rise substantially” as loan deferrals and income support end and that while the finances of most households are faring well “the number of households in financial stress has increased and will increase further.

The Reserve Bank has cut the official cash rate to an all-time low of 0.10 per cent from 0.25 per cent.  This effectively takes the cash rate to near negative interest rates and the RBA is now out of ammunition in terms of the official cash rate.  Any further support the Australian economy requires will have to come from fiscal policy and quantitative easing – but then fiscal policy has been doing most of the heavy lifting in 2020.  While it can be argued that this latest interest rate cut will do little to stimulate demand, it will likely feed through to lower fixed rate mortgages. That can provide a powerful charge to the economic recovery.

While significant uncertainty is likely to continue and will cause some ongoing volatility, I firmly believe that when we look back to this period in a few years’ time, we’ll view it as an excellent time to have invested in the market.

Global Markets

While every US presidential election is contentious, this year’s race seems especially divisive. Partisanship is extreme, and the difference between Donald Trump and Joe Biden in approach, personality and behaviour is stark. The charged rhetoric may increase the uncertainty and anxiety for investors as we approach election day. Most recently we saw evidence of this anxiety as the market reacted to news of President Trump’s positive Covid-19 test. But what does the election really mean for the economy, markets and investors? In my view, elections cause a lot of volatility and anxiety beforehand, and then not much of substance for the broad economy and financial markets afterward. A lot of that temporary volatility comes from politicians making speeches about policies and programs that they are rarely able to fully enact. This year, however, there is also the prospect of a delayed result or a contested election to consider. If either candidate’s winning margin is decisive, we do not think there is much possibility for real contention at election time. Long-term market and economic direction are about what happens, and in that respect, a single election is almost irrelevant to our long-term outlook. While there may be some link with reality and the value of stocks, a large proportion of what we’re seeing is a reaction to things seemingly not being as bad as first thought, and also a wilful desire to pretend things are not as bad as they are.

While we do not necessarily have a pessimistic view about the economy and stock market, we think that valuations are looking relatively full and that stocks are likely to churn and move sideways as they remain in a broad trading range. Ultimately, we expect that political clarity, medical advancements and continued economic reopening will pave the way for a stronger globally synchronised and self-sustaining economic expansion, but the timing remains elusive. When that does occur, it would help stock prices move higher and would also likely lead to a leadership rotation away from growth toward value and away from U.S. stocks to other developed and emerging markets.


The economy has recovered from the coronavirus pandemic faster than expected, to be sure, but by most measures the nation remains in a deep recession.  Many Americans returned to work starting in May and the U.S. has regained more than 11 million jobs since the recovery began. Yet that still leaves about half of the 22 million Americans who were laid off early in the crisis without a job. What’s worse, new hiring has tapered off sharply. The number of jobs added in October is likely to slow for the fourth month in a row to perhaps 500,000 or less. At that rate, it could a year or more before the economy regains all the jobs erased by the pandemic. And perhaps even longer.

Markets in recent weeks have been held back by fears over rising infection and fatality rates. A record rise in daily new coronavirus cases in October now threatens to sap a recovery that was already losing momentum. In a country of 331 million people, with 50 state governments employing 50 different approaches to the coronavirus crisis, whoever wins the election in November has a dauting task ahead to contain the outbreak.  Twenty-eight states reported their daily record high of COVID-19 cases in the month of October as experts warned another wave, maybe even bigger than the last two, would hit the US this winter.

Add to this the lack of a new stimulus agreement and apprehension over the election result. Individuals and families hoping for economic aid from the federal government will have to wait until after the election on Nov. 3 and perhaps until next year, with White House and Democratic negotiators having walked away from talks on another financial stimulus package. How eager Democratic and Republican negotiators are to reboot talks and hammer out an agreement on a new stimulus proposal could have everything to do with who wins what. A shift in the political majority of the House of Representatives or the Senate — or both — could either bolster the current members or sour them to work on a deal. The same goes for the presidency.

The post-election strategy investors should follow is being overweight cyclicals. These are stocks that were most hurt from the economic declines associated with COVID-19 and are set to benefit from a steady reopening of the economy.  Additionally, investors should sell the “economy closed” winners, namely technology stocks that have thrived during the COVID-19 lockdowns. Investment implications for either a Joe Biden presidency or the re-election of President Donald Trump are nearly identical, there is only one big difference between a Trump and Biden win. If Trump wins, expect Trump to cut taxes. If Biden wins, expect Biden to raise the capital gains tax, leading to the selling of winners like technology stocks.


Governments are attempting to open economies while continuing to restrain the virus. Opening speeds and virus measures differ markedly by country, which can, and no doubt will, result in differing effects on both health and economies. Governments are also moving quickly in response to emerging data and changes in virus transmission rates, with a key example being the speed with which the UK travel corridor list has changed over time, with countries going on and off as regional second waves kick in. As a result, it’s hard to gauge the future of government actions in response to both the virus and its economic and social effects.

We did see something of a recovery, and it came quickly as people came back to work. A jump in car prices and sales activity provides a clear indicator that things had begun to go in the right direction. However, more recently this has started to disappoint. As the economy opened, expectations proved supportive for markets, but more recently this has begun to erode leading to uncertainty and potentially more volatility.  Data showing the euro zone economy rebounded more strongly than expected also helped prop up markets, but fears that the recovery would be cut short as countries reintroduce restrictions to stem a second wave of the pandemic kept gains in check.  Spain, one of Europe’s worst COVID-19 hot spots, declared a state of emergency until early May 2021, and Germany and France reimposed tight restrictions.

On Thursday 29th, the central bank gave its clearest signal yet that it will ease policy in December to help the economy through the health crisis. The ECB’s actions will likely work to sugar-coat the potential downside risks in risk assets and peripheral bond markets over the coming 1-2 months. By pre-promising, a recalibration of the instruments in December, the ECB effectively added a put to risk assets. A bigger sell-off means a bigger package in December. Such support from the ECB will be essential as the virus continues to ravage the populations of Europe. Whether it will be enough to turn the stock market back on to a more positive path is another matter.

United kingdom

England is going into a second lockdown for one-month and the government will extend the furlough scheme to help protect jobs. Non-essential shops and hospitality will have to close, and travel will be under new restrictions, from Thursday and until 2 December. Schools and colleges will be allowed to stay open.

With infection rates doubling every nine days and an estimated 960,000 people carrying the virus in England on any one day. The UK has been teetering on the edge of a full-scale national lockdown for some time as a growing number of regions fall into Tier 3 restrictions.

UK government borrowing hit a record high of £208.5bn in the first six months of the financial year, as extra spending to tackle the pandemic pushed the budget deficit – the shortfall between spending and tax revenue – further into the red. The national debt – the sum of every annual budget deficit – also rose to more than £2.06tn, or 103.5% of GDP. Growth slowed in August despite the eat-out-to-help-out scheme fuelling a rise in consumer spending. Gross domestic product (GDP) rose in August by 2.1% on the previous month – less than expected by economists – as the rebound faltered in the late stages of summer before new restrictions were imposed. Although continuing a fightback from the deepest recession in history for the fourth consecutive month, GDP remains 9.2% below pre-pandemic levels, and could take years to recover.

The United Kingdom left the EU last January, but the trade deal would kick in when it leaves informal membership – known as the transition period – in nine weeks’ time. If a deal can be done before the transition period ends on Dec. 31, the two sides would sign more than 1,000 pages of international treaties covering everything from smoked salmon and cheese to car parts and medicine.

Business leaders have warned Boris Johnson that Britain’s economy is ill-prepared for a no-deal Brexit while companies face severe disruption from the coronavirus pandemic. Business groups called for an urgent resolution in the Brexit talks after the prime minister told UK businesses to get ready for trading with the EU on terms “that are more like Australia’s” – code for leaving without a deal and relying on World Trade Organization terms.


The Japanese economy continues to lag the recovery of other major regions, with the services sector being particularly disappointing. Prime Minister Shinzo Abe’s successor, Yoshihide Suga, should see the continuation of Abenomics, with a focus on policy accommodation to try to achieve 2% inflation. As cabinet secretary, Suga was instrumental in implementing elements of Abenomics. Suga has indicated that he will pursue further fiscal support before year-end in the form of payments to small and medium enterprises and households. Even with the continuation of Abenomics, and the potential for further stimulus, we expect that Japan will remain a laggard in the recovery, due to constrained monetary policy and deflationary dynamics.

Yet despite all the volatility, Japanese equities remain one of the more resilient markets globally with the MSCI Japan only down 1.6% since the start of 2021.Japanese equities also appear undervalued compared with historical valuations and other major markets.   An upward stock price revaluation could occur as corporate governance, shareholder returns and return on equity improve. Changes in the behaviour of cash-rich companies that have not been proactive in returning profits to shareholders could also trigger the revaluation. The widening gap between dividend yields and long-term interest rates may also support valuations.

However, the market also faces several potential risks such as economic stagnation, rebound in coronavirus infections as we enter the autumn and winter seasons, foreign exchange fluctuations due to competitive monetary easing, volatility in oil prices and structural changes in China’s economy. The scale of new COVID-19 cases is likely to be critical as a large part of the recent recovery in equity markets in Japan as well as globally has been based on the assumption that economic activity will improve, which, in turn, hinges on how well COVID-19 is being contained.


We think that Chinese economic activity will remain strong over the next few quarters at least. This is underpinned by the proactive steps taken by the government earlier this year, in response to the impact of Covid-19.  In order to restart and support the economy post the pandemic, various stimulus measures were unveiled, with budget for additional spending earmarked.

This included a special purpose bond issue from the central government. In addition, prior to the pandemic, the government had already increased the local government bond issuance quota. This money will be used to fund infrastructure growth, as well as investments aimed at improving public wellness. Meanwhile, monetary policy easing from the People’s Bank of China earlier this year should also prove beneficial, though there is typically a lag before its impact is visible.

The Chinese economy grew 4.9% between July and September, according to government data, as China becomes the first major economy to recover from the Covid-19 pandemic.  The year-on-year expansion, while slightly lower than analyst expectations, represents a dramatic reversal from the first quarter of this year when the economy shrunk by 6.8%.  Most Chinese cities have returned to normal with schools and offices reopened. Before a new outbreak in the eastern province of Shandong, the country had gone almost two months without any new locally transmitted cases. The latest data showed industrial production in September rose 6.9% compared to the same period last year. Retail sales were up 3.3%. Auto sales for the month also increased 12.8% while domestic air travel exceeded pre-pandemic levels. Consumer spending has begun to pick up again, illustrated by a resurgence in tourism during a week-long public holiday in October known as Golden Week. China’s economic recovery still remains uncertain in the face of job losses, uneven growth across the country, elevated levels of household and corporate debt, as well as trade frictions as ties with the US and other trading partners continue to deteriorate. Others doubt official economic data, which have in the past been inflated by local governments.

The Chinese leadership, anticipating slower growth and a more difficult international environment, are pursuing a new strategy known as a “dual circulation economy.” The concept first proposed by Xi Jinping in May is aimed at reducing the country’s reliance on overseas markets and technology and fostering domestic consumption and advances in technology.



Central banks became gold sellers for the first time since 2010 as some producing nations exploited near-record prices to soften the blow from the coronavirus pandemic. Net sales totalled 12.1 tons of bullion in the third quarter, compared with purchases of 141.9 tons a year earlier, according to a report by the World Gold Council. Selling was driven by Uzbekistan and Turkey, while Russia’s central bank posted its first quarterly sale in 13 years. While inflows into exchange-traded funds have driven gold’s advance in 2020, buying by central banks has helped underpin bullion in recent years. Gold rallied to a record above $2,075 an ounce in August, before declining to trade around $1,900 in recent weeks. Overall bullion demand fell 19% year-on-year to the lowest since 2009 in the latest quarter, largely thanks to continued weakness in jewellery buying. Indian jewellery demand fell by half, while Chinese jewellery consumption was also down. Total supply of gold declined 3% year-on-year as mine production remained depressed, even after Covid-19 restrictions were lifted in producers like South Africa. A quarterly uptick in recycling softened the decline, with consumers cashing in on high prices. Strategically, gold should remain in an investors’ portfolio allocation because it is one of the best alternatives to government bonds in periods of zero rates.


OPEC+ has played a major role in stabilising the oil market while U.S. shale producers have steadily taken more market share over the past five years. I expect that, so long as global oil demand remains depressed below 2019 levels, Saudi Arabia, Russia, and their cohorts in OPEC+ will only act as a stabilising force to a limited extent. There is simply too much at stake for these oil states, and their pricing power is their best weapon against U.S. shale producers. As much as oil markets have stabilised, many U.S. oil companies have a much smaller margin of safety today than they did six months ago, and a further, prolonged deterioration in oil prices could prove fatal. The shale industry may not be facing an existential crisis, but plenty of individual companies are.

Oil posted its largest monthly drop since March as renewed lockdown measures to contain the coronavirus threatened to upend a shaky demand recovery.  A return to tougher lockdown measures will likely deter a substantive rebound in airline demand, with more restrictions in Europe prompting further cuts in airline capacity for the remainder of the year. Still, there is some support from the robust freight markets and improvements in China and India. Meanwhile, traders are looking ahead to OPEC+ meeting at the end of November.

Sector 12 Month Forecast Economic and political predictions 2017



The Australian dollar has fallen back towards 70 cents, but looks to be very well supported at this level.


Even though they yield less than 1 per cent, foreign investors have been buying our longer-dated bonds. That cash coming into the country pushes our currency higher and makes us less competitive on the world stage. The RBA hopes to depress the yield even further, limit demand for the bonds and weaken the currency. If we are to get our economy back on track, the dollar needs to drop.





$US2000/oz- $US1600/oz


I expect demand for gold to continue given low real yields, medium-term inflation expectations and central bank QE programs, even if it has paused for now.

Gold is likely to remain stuck between the tram lines of $US1850-to-$US2000/oz in the short-to-medium term which means “its material upside seems limited”.

But as the global economic recovery gathers pace and a vaccine emerges to control the spread of COVID-19, gold will slide towards $US1600/oz.







Commodities are still cheap, relative to stocks.


Oil prices remain under pressure as the growth outlook deteriorates with the health situation. Demand is likely to remain subdued for some time but should eventually recover as the recovery outlook improves again. Prices could remain capped by ongoing oversupply, but there is room on the upside.


Energy prices overall —which also include natural gas and coal—are expected to rebound sizably in 2021, following large declines in 2020.


Metal prices are expected to post modest increases in 2021 after falling in 2020, supported by the ongoing recovery in the global economy and continued stimulus from China.





We are seeing some good opportunities in alternative real estate, such as land lease communities, storage, and childcare centres.


Real estate investment trusts (REITs) sold off heavily in March, with investors concerned about the implications of social distancing and online shopping for shopping malls and office buildings. Sentiment appears overly bearish, while value is positive. These should be a pandemic recovery trade



Australian Equities


Investor sentiment has turned abruptly in favour of beaten-down stocks as recovery bets mount.


Shares remain vulnerable to further short-term volatility given uncertainties around coronavirus, economic recovery, the US election, and US/China tensions. But on a 6 to 12-month view shares are expected to see good total returns helped by a pick-up in economic activity and stimulus.





Low inflation and dovish central banks should limit the rise in bond yields during the recovery from lockdowns.


Long dated bonds 5-year duration.


Inflation Linked Bonds.


I believe the relative calm of bond markets is likely to persist and we maintain a preference for credit over sovereigns, even if spreads can remain range-bound in the short term. Indeed, credit spreads have held in through the latest equity market volatility, showing resilience. I remain more cautious on high yield, as the extent of the damage from the crisis is still unknown and default risk remains elevated in 2021





Cash Rates




Cash & bank deposits are likely to provide very poor returns, given the ultra-low cash rate of just 0.10%.


Global Markets





Risk to US stocks include concerns about the pandemic, fading fiscal stimulus, volatility around the election.


The US election has tightened further over the last week, making it harder to call. The tightening is likely weighing on shares as it implies an increased risk of a contested election and less chance of substantial post-election fiscal stimulus to the extent that a “blue wave” that sees the Democrats win the presidency, control of the Senate and the House may be somewhat less likely.







While we are neutral on Europe overall, given tentative recovery versus ongoing risks, we have a marginally more positive tilt towards peripheral European markets.


While the ECB left monetary policy on hold, it indicated that it will “take action” and “recalibrate all our instruments” at its December meeting on the back of the threat from rising new coronavirus cases and a loss of momentum in the recovery. We expect this additional easing to take the form of more bond buying and extended cheap bank financing. The recovery in Eurozone confidence stalled in October reflecting the rise in new cases.







Shinzo Abe’s retirement announcement was a relative surprise to markets, but we believe ‘Abenomics’ is sufficiently entrenched that we would not expect a meaningful change in policy, and so our view remains neutral.


The Bank of Japan left monetary policy on hold as expected and revised up slightly its assessment of current conditions. On the data front consumer confidence continued to recover in October, as did industrial production in September, unemployment was unchanged but the jobs to applicants ratio fell slightly further.











China is experiencing a strong V-shaped recovery, with its real output in the second quarter rising 12 per cent after a decline of 10 per cent in the previous three months. Data also points to improved capital spending.



The Chinese economy continues to perform well according to the latest data released by the government.


Most notable was the strong growth of real GDP in the third quarter. However, as strong as it was, growth in the third quarter was slower than many analysts expected, largely due to slower-than-anticipated growth of consumer spending.





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