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News And Commentary

Capital flight towards Germany

Peugeot, the French car maker, is taking over Germany’s Opel. The German Bundesbank’s claims under Target-2 have reached a new record. At first sight these are unrelated. Yet they have something in common. Each signals capital flight towards Germany, writes Frank Westermann.

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Bumpy post-Brexit ride

Britain and Germany are inching towards an accord on financial market co-operation after Brexit, but the journey could be a bumpy ride, writes David Marsh. Andreas Dombret of the Bundesbank recently warned that rationality would not necessarily guide policy-making during a politically fraught period.

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'Cascade' method to sustainable finance

Joaquim Levy, managing director and chief financial officer of the World Bank Group, advocated the adoption of a 'cascade approach' to sustainable infrastructure financing at a breakfast discussion in London organised by OMFIF. Levy spoke on the subject of climate-friendly investment in developing countries.

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Trump 'has his own party to fear'

Only three presidents have ever faced impeachment, and each had to confront opposition-party control. Today, Republicans run both the White House and Congress. Donald Trump has his own party to fear, writes Brian Reading. As his time in office passes, Trump is more likely to make new enemies than new friends.

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ECB policy 'can't be only game in town'

'Monetary policy cannot be the only game in town: other policy-makers must display the same commitment to ensuring a sustainable economic recovery', according to Peter Praet, member of the executive board and chief economist of the European Central Bank, at an OMFIF meeting in London.

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The dangers of European redenomination

As in 2011 and 2012, rising risk today of the reintroduction of domestic currencies in Europe from the possibility of a French exit from the euro area would boost risk premiums and encourage money to flow out of weaker economies and into Germany, write Stephen Cecchetti and Kim Schoenholtz.

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Cunliffe chides 'currency nationalism'

'Currency nationalism', for example through restrictions on currency clearing geared to national European jurisdictions, could 'fragment financial markets and impede stability', according to Bank of England Deputy Governor Jon Cunliffe in an OMFIF City Lecture in London.

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Fears over a French franc return

Developments in France have revived concerns about redenomination risk, write Stephen Cecchetti and Kim Schoenholtz. If Marine Le Pen, leader of the National Front, wins the presidential election in May, the plan reportedly is to withdraw from the euro and reintroduce the franc.

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Promoted meeting 2 VIEW PHOTO GALLERY

David Marsh, managing director of OMFIF, handing over a copy of the OMFIF Code of Conduct and OMFIF Rules to Peter Praet, executive board member and the chief economist of the European Central Bank. The 23 February discussion focused on the macroeconomic situation in the euro area, monetary policy and economic and monetary union.

Investment Clock: Loose monetary policy fuels growth

OMFIF Chart

Investment Clock: Loose monetary policy fuels growth

The Investment Clock has been in the 'overheat' phase of the business cycle since July 2016. Things have heated up recently in what could potentially be the strongest surge in nominal growth since the financial crisis. Hopes of loose US fiscal policy and deregulation under Trump could add fuel to the fire.

Investment clock: Trump vote could strengthen overheat phase

OMFIF Chart

Investment clock: Trump vote could strengthen overheat phase

The markets had another surprise in November with the election of Donald Trump. His victory has been taken badly by the bond market as it marks a transition from monetary ease towards fiscal ease. This is a positive backdrop for stocks.

Investment clock: Brexit boosts multi-asset returns

OMFIF Chart

Investment clock: Brexit boosts multi-asset returns

Multi-asset performance has been very strong since the UK referendum, rewarding sterling-based investors with exceptional returns for the year to date. Bonds surged globally, while stocks benefited from an increase in the value of overseas earnings in sterling terms.

Investment clock

OMFIF Chart

'Investment clock' shows gains for equities

The pick-up in global growth against a low inflation backdrop puts the investment cycle still in an equity-friendly ‘recovery’ phase, according to the Investment Clock, a model-based framework linking asset returns to different phases of the global business cycle.

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US ahead of China in global stakes

Advisory Board

US ahead of China in global stakes

In answer to the question, ‘Will 2017 be the year when the US retreats from the international stage and China takes over as de facto world leader?’ the OMFIF Advisory Board expects that the US will maintain its role of leadership in the world, despite taking some economic damage as a result of its switch to a domestic focus.