Tags: terror | Europe | risk | investing

Terror Attacks Barely Stall Investor Appetite for Risk

Terror Attacks Barely Stall Investor Appetite for Risk

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Tuesday, 20 December 2016 01:00 PM Current | Bio | Archive

Firstly, in the German capital Berlin, a truck was deliberately driven into a crowded Christmas market, killing 12 people and injuring almost 50 while, according to the Deutsche Presse-Agentur. The police remain uncertain if the man they arrested was indeed the driver of the truck.

Secondly, in the Turkey, Moscow’s ambassador to Ankara was shot and killed by a young Turkish policeman.

Thirdly, in the Swiss city Zurich a still unidentified man shot 3 men in an Islamic center.

These events have created, at least until now, only a modest degree of risk aversion in financial markets.

Aside from the human tragedy, investor concern will shift to the political implications especially in the EU where 2017 is an election year with general elections in the Netherlands, France and above all in Germany.

Of course, it is still way too early to draw any meaningful conclusions from the events that occurred yesterday.

Trump has tweeted: “Today there were terror attacks in Turkey, Switzerland and Germany -- and it is only getting worse. The civilized world must change thinking!”

Besides that, Trump was elected President yesterday as members of the electoral college casted their votes. The votes will be formally counted on January 6th. It is worth noting that some votes were not cast for Trump or for Clinton as some members of the electoral college protested the process, which allows differences between the popular vote and the outcome. However, there were too few rebellions to make any difference.

The Bank of Japan (BOJ) concluded its final meeting for 2016 where we saw the implementation of a decisive, bold, revolutionary new policy initiative in the form of 10-year yield targeting. This would perhaps be a little more impressive if it were not the 27th decisive, bold, revolutionary new policy initiative that the Bank of Japan has implemented since the introduction of the zero interest rate policy in 1999.

One can only marvel at how well the preceding 26 decisive, bold and revolutionary new policy initiatives of the BOJ have worked.

Bank of Japan Governor Kuroda at his press conference today declared decisively, boldly, but not perhaps without any revolutionary overtones that the yen was not too weak. He also declared that it was too soon to start discussing raising the Bank of Japan’s bond yield target. Nothing of any note was decided with respect to policy.

From its side, Germany’s producer price inflation (PPI) moved back into positive territory (0.1 percent) for the first time since June 2013. This was the result of a stronger than expected 0.3 percent monthly rise that lifted annual PPI inflation by fully 0.5 percentage points, which is by the way its seventh increase in as many months. Important for ECB policy and of course to investors is that German CPI is forecast to accelerate to 1.5 percent in 2017, up from 0.4 percent now. Euro-zone CPI is expected at 1.3 percent, up from 0.2 percent now.

Within Europe, Germany does have a stronger claim to rising inflation pressures as the local labor market, the main driver of inflation in almost any economy over time, is relatively tight. Wage pressures are therefore building. Producer price inflation is also the more relevant price measure to use when considering where the companies have pricing power.

For investors, 2017 will probably be the year of beyond expectations strengthening inflation in the most important places on the globe. This phenomenon should not be taken lightly as it will cause monetary policy consequences that could be not that friendly to equity markets.

Finally, the ongoing saga of the UK exit from the EU goes on today with the UK Prime Minister being questioned by the UK parliamentary panel on the exit. Parliamentary panel may turn out to be one of the more thoughtful challenges to the government’s position. So its deliberations and the result of its hearings are probably worth monitoring.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.
 

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Firstly, in the German capital Berlin, a truck was deliberately driven into a crowded Christmas market, killing 12 people and injuring almost 50 while, according to the Deutsche Presse-Agentur. The police remain uncertain if the man they arrested was indeed the driver of...
terror, Europe, risk, investing
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2016-00-20
Tuesday, 20 December 2016 01:00 PM
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