Coffee Break 10/11/2021


  • The US Congress voted to raise the debt limit by $480bn but the agreement only covers government borrowing until December 3rd.
  • The White House said that US President Joe Biden and Chinese President Xi Jinping had agreed to meet by year-end.
  • Central banks around the world continued their hawkish leaning as the Reserve Bank of New Zealand and the Polish central bank implemented surprise hikes.
  • The Caixin China General Services PMI jumped to 53.4 in September from 46.7 in August as a major COVID-19 outbreak in the eastern province of Jiangsu eased.



  • Markets will digest the mixed US Job report as the unemployment rate dropped to 4.8% while job creations came out lower than expected (+194k). Of note, the Canadian neighbour saw employment returning to pre-pandemic levels.
  • The Fed will release the minutes of its September meeting and watch the release of the US CPI data, which is the last before the next Fed’s meeting.
  • Europe will pay attention to Russia’s position on energy supplies as President Vladimir Putin offered to help stabilise the market by increasing supplies.
  • In Germany, the Social Democrats, the Green party and the pro-business Free Democrats will hold talks to form a government coalition. Housing, labour market, tax rules and European policy should be the main friction points.


  • Core scenario
    • In our central scenario we consider that growth is impacted by temporary factors and we maintain the view that we are in the middle of the reopening, not of the economic recovery cycle. Reflation plays have a more attractive risk-reward and should benefit from a reduction in risk perception. The expected continuation in the rise of real interest rates is the key trigger for a possible outperformance of the value part of the market.
    • We believe that this context remains positive for ex-US equities, value stocks and assets (banks) and short duration.
    • In the US, growth and inflation data should stay at elevated levels and the Fed is expected to announce a tapering before year-end.
    • In Europe, monetary dynamics are still positive and should stay accommodative. Fiscal dynamic should remain positive with the roll out of the NGEU and the upcoming coalition talks in Germany could ultimately help the EU risk premium decline.
    • In emerging markets, we assume that Latin America should further benefit from the catch up in the reopening trade. On the long run, China should benefit from growing domestic demand.
  • Risks
    • Fed and ECB tapering will be another focus in the coming weeks. Inflation is still widely seen as temporary, which should allow central banks to control their communication and avoid any policy mistake.
    • Regulatory tightening in China has triggered a correction in July / August on Chinese stocks and on stocks exposed to China. Policy easing should help find some support and allow some catch up in Q4.
    • Coronavirus. Countries and regions that are less well vaccinated are the more at risk. But the current situation does not stop the reopening of the economies in developed countries. With fall arriving, this reopening should go better than last year.


Sentiment was mixed with hopes of a near-term agreement on the US debt ceiling, press reports on ECB’s QE follow-up programme and the Joe Biden/Xi Jinping meeting before the end of the year. However, energy markets remain undersupplied with OPEC+ refusing to boost production by 800k bbl/day and soaring gas price. Supply bottlenecks (weak German factory orders), employment bottlenecks and central bank rate hikes contribute to fuel concerns. US 10Y yields have hit 1.60%.



We expect a more sideways phase with a possible increase in volatility before finding a clearer direction and a continuation of the reflationary environment. We are neutral equities and underweight bonds.

  1. We have exposure to assets related to the post-COVID rebound/recovery
    Neutral equities, underweight bonds, preference for ex-US equities especially Emerging Markets through Latin America equities and China A onshore stocks.
    Underweight government bonds, keeping a short duration. We focus on the source of the highest carry, i.e. emerging debt. We stay neutral US and European investment grade credit. We have a currency exposure to the NOK.
  2. Positive stance on Small caps
  3. Positive stance on Global Banks
  4. Positive stance on long term growth thematics
    Environmental solutions, digitization and healthcare are our strongest thematic convictions. Tech and Innovation themes, as well as Oncology and Biotech sectors reveal high growth potential.