Thursday (December 13) marks the end of an era for the ECB, which is set to formally announce the end of its three-year long, 2.6 trillion-euro monetary stimulus scheme.

For markets, that’s a done deal. What matters now is what the ECB does in the face of a weakening economy, global trade tensions, Brexit and Italy. Policymakers have already been floating ideas to support the economy when QE ends. One suggestion is for multi-year loans to banks.

What investors appear more certain about is that the ECB will struggle to bring interest rates back up to zero percent – especially if a U.S. slowdown encourages the Fed to pause its rate-hike cycle. Money market pricing suggests investors expect roughly a 75 pct chance of a ECB rate hike in 2019. But that’s down from 100 percent just a few weeks ago.



With major parts of the U.S. economy visibly slowing, the Treasury market has reacted in a striking manner – the 10-year yield is close to falling below the two-year yield, which would mark the curve inversion that has preceded every recession in the last 40 years. Signs of slowdown have persuaded markets to bet the Fed will slow the pace of rate increases next year.

But wait. Inflation is running at a 9-month high, annual wage growth a 9-1/2 year high and unemployment at a near-50 year low. So November inflation, due Wednesday (December 12), will play into how Fed chair Jerome Powell frames the path of future tightening.

So it remains to be seen where the curve goes from here. There are reasons to believe it can steepen and reasons to believe it will invert. Depending on how the incoming data looks – stagflation, anyone? – the Fed’s view on where neutral is and what its policy response should be in the coming months is far from clear.



Buckle up for another wild week of Brexit may-hem on sterling and other UK-focused markets.

Britain’s parliament is – at the time of writing at least – set to vote on Prime Minister Theresa May’s Brexit transition deal on Tuesday (December 11), but the chances of it being approved don’t look good.

What happens then is… well that’s the thing, there are multiple possibilities, all with very different implications.

A really heavy defeat would make it difficult for May to carry on. She has staggered through the last couple of years, taking direct hits from all angles but this could finally bring her down.



China suffered another economic blow on Sunday (December 9) with the return of deflation, a day after it reported slower than expected growth in exports and imports.

A fall in both consumer and producer price indexes was a result of weakness in demand from both Chinese consumers and investors and reflected their reluctance to spend as confidence in future growth is undermined by the trade war with the US.

The return of deflation provides fresh evidence that China’s US$12 trillion economy is heading into trouble, even though China and US have agreed a 90-day truce in the trade war during which they will try to resolve their differences.

The country’s exports decelerated rapidly last month, although China’s trade surplus with the US widened to a record level.

Expect some Trump tweets.



This movement is gaining traction and proving to be difficult for the authorities to contain. Upwards of 130,000 Yellow Jackets were on the streets in France, Holland and Belgium – and more than 1,200 were taken into custody.

The French love to demonstrate and the trade unions are good at organizing them – but no political body appears to be in charge this time round. Nevertheless, an opinion poll in France showed that 66% of respondents supported this populist movement.

So, what do they want? Lower fuel tax, higher wages, lower taxes, better pensions, easier university entry requirements, Macron’s departure – and every other populist issue.

Macon will Monday (December 10) meet with representatives of the Trade Unions – who have taken up the cause – to try to defuse the situation. It’s going to be tricky, especially since Macron’s approval ratings have dropped to 23%.