יוליוס בר >> הגיע הזמן לממש רווחים בהשקעה בזהב

***

 

MACRO RESEARCH

 

 

 

CHINA: LOWER LOAN PRIME RATE IN LINE WITH EXPECTATIONS

 

As widely expected, the 1-year and 5-year loan prime rates (LPR) – the reference lending rates set each month by 18 banks – were lowered to 4.05% and 4.75% respectively this morning after the PBoC cut the interest rate on medium-term loans on Monday. Amid slow resumption of work and subdued overall activity after the extended holidays due to the coronavirus outbreak, the authorities aim to ease financing costs for the real economy.

 

 

 

Since markets opened after the extended Lunar New Year holidays, the People’s Bank of China (PBoC) has provided support through liquidity injections and cuts in interest rates on open market operations. In particular, it cut two of its policy rates, the 1-year medium-term lending facility (MLF) rate and the 7-day reverse repurchase rate, by 10 basis points this month to counteract the negative impact of the coronavirus outbreak on the Chinese economy. As the MLF rate serves as a guide for the LPR, today’s cut was widely expected. We expect the drag on the Chinese economy due to the coronavirus outbreak to be substantial but temporary, with growth of real gross domestic product (GDP) slowing to 4.5% year-on-year in Q1 and then recovering in Q2 and Q3 as a result of pent-up demand and production as well as monetary and fiscal policy support. We will probably see further reductions in the PBoC’s policy rates and the reserve requirement ratio during the first half of the year to reduce financing costs and provide longer-term liquidity. However, we do not expect a massive stimulus programme in our base scenario. The monetary easing efforts by the PBoC could weigh on the Chinese yuan. The currency has eased over the past few days and is currently trading slightly above 7 to the USD. However, we expect the PBoC to keep the currency largely stable and expect the CNY to fluctuate around 7 over the coming weeks. We thus maintain our short-term and long-term Neutral view on the CNY.

 

Sophie Altermatt, Economist, Julius Baer

 

 

*

 

 

US DEMOCRATIC PRIMARIES: WINNING WARREN, BEATEN BLOOMBERG, SAFE SANDERS

 

With the field now complete by including Michael Bloomberg, the Las Vegas debate was widely seen to have given tailwind to Warren for the coming Nevada primary and, more importantly, for Super Tuesday. Sanders, although leading in the polls, exited the debate unscathed, as Bloomberg found himself under fire from all sides and did not make a very good first impression.

 

Elizabeth Warren was widely regarded as having won the latest Democratic debate. She finally started to show her fighter qualities by attacking her contenders, especially Bloomberg, thereby shaping the debate. As a result, her campaign raised a lot of funds both during and after the debate, which can be seen as a potential sign of revival. Mr Bloomberg, who appeared for the first time in a debate after a funding criterion for participation was dropped, faced scrutiny from all of the candidates and was not able to make a good first impression. This may have benefited other centrist candidates like Buttigieg and Biden, who could get some votes from a weakened Bloomberg. Sanders, who is leading in the delegate count and in Nevada polls, remained relatively unscathed, as the other candidates focused on challenging Bloomberg.

 

 

 

Susan Joho, Economist, Julius Baer

 

 

 

*

 

FIXED INCOME

 

 

 

TURKEY: ANOTHER RATE CUT

 

As widely expected, Turkey’s central bank continued its easing cycle and cut the policy rate by 50bps. In the event of pressure on Turkish assets, the central bank may have to reverse its cuts, despite President Erdogan’s expectation of a single-digit policy rate in 2020 to help achieve an ambitious 5% GDP growth rate.

 

In its second meeting of the year on Wednesday, Turkey’s central bank has continued its easing trajectory and cut the policy rate by 50bps to 10.75%. According to the press release, the decision was based on incoming data that points to a recovery in economic activity, acknowledging that investment and employment remain weak and that the contribution of net exports to growth is declining. The central bank expects that the current account balance, after having shown significant improvement, will maintain a moderate course, while improvement in inflation will help to contain cost pressures. This latest rate action was in line with consensus and has brought total rate cuts to 1325bps since June 2019. January’s inflation reading had come in at 12.15% y/y and, as such, real rates for Turkey are now -140bps. President Erdogan seeks to achieve 5% GDP growth for 2020, mainly through credit growth, and has long advocated for lower rates, so the easing cycle is probably not over yet. After the announcement, the USD/TRY reacted negatively, standing at 6.08 at the time of writing, while spreads on Turkey sovereign bonds also widened.

 

 

 

Eirini Tsekeridou, Fixed Income Analyst, Julius Baer

 

 

*

 

COMMODITIES

 

 

 

GOLD: TIME TO TAKE PROFITS

 

 

 

As gold prices are trading above USD 1600 per ounce, we believe supportive fundamentals are more than reflected in today’s prices. As we expect fundamentals to weaken rather than strengthen in the short term, it is time to shift our view to Neutral and to tactically take some profits. In the medium to longer term, we still see gold trading above current levels.

 

 

 

Gold prices continued to move higher over the past few days, trading above USD 1600 per ounce for the first time in seven years. While we still see fundamental support from the economic uncertainties related to the outbreak of the coronavirus, we also believe that the last leg of the recent rally was driven by technical trading and trend-following. Sentiment among short-term and speculative traders in the futures market has become increasingly bullish as of late, suggesting that gold’s supportive backdrop is more than reflected in today’s prices. Looking ahead over the next few months, we expect fundamentals to weaken rather than strengthen. The coronavirus fears should fade further, while global growth should improve towards the summer, resulting in rising US bond yields while weighing on sentiment and putting short-term pressure on prices. On a three-month horizon, we still see prices retreating towards USD 1525 per ounce and thus shift our view to Neutral. It is time to take some profits, not the least as gold is up almost 35% since our buy recommendation around one and a half years ago. That said, we would likely use a setback to re-enter the market, as we expect economic risks to return on the horizon in the medium to longer term, which should revive safe-haven demand and push prices higher again. We maintain our twelve-month price target of USD 1600 per ounce, with further upside beyond that. We also shift our view on silver to Neutral, as it should continue moving in gold’s slipstream.

 

 

 

Carsten Menke, Head Next Generation Research, Julius Baer