Economic and Strategy Viewpoint

Schroders Economic and Strategy Viewpoint - September 2015

In this month's Viewpoint:  - Global: The macro impact of China  - Eurozone: Sino slowdown meets refugee crisis  - EM: Will the FX fall save EM?


Azad Zangana

Azad Zangana

Senior European Economist and Strategist

Craig Botham

Craig Botham

Senior Emerging Markets Economist

Keith Wade

Keith Wade

Chief Economist & Strategist

Global: The macro impact of China (page 2)

• China tail risks have risen and are uppermost in investors’ minds. The emerging markets are most affected by a hard landing in China, but the developed economies would still suffer a loss of 0.5% p.a. in GDP growth. This compares with a loss of 2% p.a. for the emerging markets.

• We still see a gradual slowdown rather than collapse in China, but the economic effects are already being felt in the steel industry and, more generally in an echo of past crises, will help depress inflation. With central banks lacking firepower, the response will be to keep rates lower for longer and we have pushed out our first rate rise from the US to March 2016.

Eurozone: Sino slowdown meets refugee crisis (page 6)

• Recent figures bode well for the second half of the year; however, concerns over China have hit European bourses hard. Germany has the highest exposure of the big four member states through exports to China and emerging markets, with capital investment abroad key to those exports.

• The refugee crisis in Europe has morphed from a humanitarian crisis into a political one over the burden of receiving asylum seekers. The macro impact is positive as in the short-term it prompts fiscal spending and over the medium-term helps eases Europe’s demographic challenge.

Emerging markets: Will the FX fall save EM? (page 12)

• Emerging market (EM) trade and currencies have suffered a great deal over the last year. A trade revival rests more on a resurgence in global growth than on further depreciation, which in any case carries risks.

Views at a glance (page 17)

• A short summary of our main macro views and where we see the risks to the world economy

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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.