December 24 2016

Dec. 24, 2016 (Commerzbank AG) – China grapples with capital flight

China is still battling a major exodus of capital. As we expected, the government has responded by reversing recent steps to deregulate capital movements. Since the beginning of this month, companies face the prospect of no longer being able to transfer dividend payments abroad. These measures may help to apply the brakes in the short term, but in the longer term they will deter potential investors. In the medium term, further capital controls seem more likely than a return to the cautious deregulation of recent years.

Further topics:

Gold: better times ahead

Recent pressure on the gold price is likely to become less significant over the course of next year. Indeed, ultra-loose global monetary policy, which results in low real interest rates, and great political uncertainty are likely to provide a tailwind for gold prices. We expect gold to rise to 1,300 USD per troy ounce by the end of 2017.

Outlook for the week of 19 to 30 December 2016

  • Economic data: We look for a further rise in the German Ifo business climate index in December, which would be a further signal that the German economy has picked up more momentum at the end of the year.
  • Bond market: The latest Fed rate hike may prove a good opportunity to increase duration. In the euro zone, 10y benchmark yields will follow an erratic path in the current low liquidity environment.
  • FX market: The markets are taking the Fed at face value when it suggests that rates are likely to rise more sharply. The market will therefore probably react asymmetrically: good data should help the dollar more than poor data will harm it.
  • Equity market: DAX dividends in FY2016 are expected to rise by 5% versus the previous year, which is a key bullish signal for German equities.
  • Commodity market: The price of Brent oil is likely to remain virtually unchanged until year-end as only January will tell whether OPEC will in fact reduce its supply. Base metal markets, too, are likely to extend their current-year gains into the New Year.


Dec. 23, 2016 (Tempus, Inc.) – The U.S. dollar reverted to its status as a traditional safe-haven in recent days as terrorist attacks in Turkey, Switzerland and Germany rattled investors.

The greenback has long benefitted in times or financial or geopolitical chaos for its perceived safety. The dollar also received a boost yesterday when Federal Reserve Chair Janet Yellen expressed optimism that U.S. wages were set to extend gains.

We expect the dollar to continue to take its cues from events abroad. There is a slew of data set for the second half of the week that will help dictate the dollar’s momentum over the last week of the year.


The Euro came under renewed pressure as geopolitical events are likely to put additional pressure on pro-Europe governments. A truck crashed through a Christmas market in Berlin yesterday, killing 12. German Chancellor Angela Merkel said that the act is “assumed” to be an act of terror. Merkel is up for re-election next year and a terrorist attack on her watch will add to the anti-European party’s arsenal. The rise of populism across the continent has market participants worried and widespread political uncertainty is sure to fan the flames.


The Japanese yen tumbled more than one percent against the U.S. dollar overnight. As expected, the Bank of Japan kept its policy on hold. Interest rates are currently at -0.1% and the central bank plans to continue to purchase 80 trillion yen of government bonds annually.

The central bank did upgrade its assessment on the overall economy, partly due to a weakening yen. The yen has weakened 11% against the U.S. dollar since the election of Donald Trump on November 6th. A weaker yen will lift import prices and could provide a much-needed boost to inflation.