Weekly Economic Insights - 22 October 2018

Macro Highlights - 10/24/2018

Highlights of the week

Economist insights: Further slowdown in Chinese GDP growth and the future of the stock market equivalence granted to Switzerland by the European Union 

  • In China, GDP growth slowed from 6.7% to 6.5% in the third quarter but domestic demand shows signs of stabilisation. The continuation of the stimulus policy by the authorities
  • should enable economic activity to stabilise, according to our scenario. The moderate slowdown in activity and macroprudential measures would limit the potential downside of the yuan
  • In Europe, the European Commission had taken the decision in December 2017 to grant stock market equivalence to Switzerland for a limited period of one year in 2018
  • The renewal of this equivalence depends on significant progress in the framework agreement for the simplification of the bilateral agreements between Switzerland and the European Union
  • Even if a definitive agreement is not found by the end of the year, an extension of the market equivalence is possible based on the progress made, according to our analysis
  • In the opposite case, the non-renewal of the equivalence would have negative consequences on the future bilateral relations between Switzerland and the EU, and the financial markets

Focus Housing Markets: Evolution in Germany, France Italy and Spain

  • In the eurozone, solvency and risk premium indicators showed an improvement in the Spanish, Italian and French residential property markets
  • Since 2013, residential property prices have risen by 24.2% in Germany, 18.8% in Spain and 4.4% in France, but continued to decline in Italy (-10.7%)
  • The German market is characterised by a housing deficit and a desynchronisation with the world property cycle, while France’s has been supported by tax schemes
  • The Spanish market  has benefited from  the  improvement  in  household solvency  and foreign demand. In Italy, the stock of unsold homes has driven the drop in prices
  • The rise in property prices in Germany, France and Spain will weigh on household solvency
  • However, their levels do not suggest an abrupt downturn in these residential markets but rather a stabilisation

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