021218 CGI Weekly Global Equities Strategy Update
In Asia, Japan’s government has decided to nominate Haruhiko Kuroda for a second term as governor of the central bank when his current one expires in April, a sign the country's ultra-loose monetary policy will remain in place. The reappointment, widely expected by financial markets and reported late on Friday by Japanese media, will heighten the chances the BOJ will stick to its policy of capping borrowing costs around zero. This offers some relief to investors jittery about signs that some major central banks may dial back their crisis-mode policies earlier than expected. We see this as a sign of stability and are expecting a positive impact on Japanese equities overall.
In Europe, the ECB is concerned that the US is exerting "political influence" on exchange rates and will make this a theme at upcoming G20 meetings, ECB policymaker Nowotny said in an interview on Sunday. "We in the ECB are certainly concerned about attempts by the US to politically influence the exchange rate”. "That was a theme of economic discussions in Davos, where the ECB addressed this, and it will certainly be a theme at the upcoming G20 summit." the US Treasury department was deliberately putting downward pressure on the USD. A weaker USD tends to benefit large US multinational companies, but it can also make imports more expensive and hurt consumers. The USD has fallen 2% this year and declined 10% in 2017. The next G20 summit will be held next month in Argentina.
In the Americas, the White House budget proposal projects US economic growth of 3.2% next year, before declining to 3% in 2021 and 2.8% in 2026. The budget, which is due to be released on Monday, assumes the 10-year Treasury yield will average 2.6% this year and 3.1% next year before rising to 3.7% by early next decade
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