Sept. 24, 2016 (Commerzbank AG) – China’s state-owned enterprises – Ways out of zombification?
China’s state-owned enterprises are on a borrowing binge and are depriving private companies of resources. We take a closer look on SOEs and show that central and local government will not loosen their control of these companies significantly for economic reasons alone. Far-reaching reforms of the sector are not to be expected with the result that growth-inhibiting sclerosis is likely to strengthen.
- Forecast changes: ECB to cut depo rate later On our regular monthly forecast meeting we slightly adjusted the ECB forecast. We now expect the ECB to cut the deposit interest only in March 2017 and not already at the end of 2016. After all, it will take longer until the ECB will revise its projection of rising core inflation down. Thus, the euro is set to appreciate more slowly.
- Meeting of oil producers – much ado about nothing At the oil producers’ meeting in Algiers next week, there is unlikely to be a voluntary limit on production. We have lowered our price forecast accordingly.
Outlook for the week of 26 to 30 September 2016
- Economic data: The euro zone’s headline inflation rate is about to gradually increase. In the US, core inflation is slowly drawing nearer to target.
- Bond market: We expect 10y Bund yields to test the lower boundaries of their well-established sideways range while volatility is grinding lower again.
- FX market: The central bank decisions of the last few days have led to something of a reshuffle. We have revised several of our exchange rate forecasts.
- Equity market: We expect the DAX to outperform the S&P 500 as, among other things, auto sales should remain robust and the Brexit vote should have only limited impact on German GDP growth.
- Commodity market: Oil prices should drop if, as we expect, the meeting of leading oil producers fails to produce any results. Metal prices can be expected to tread water next week.