Asset price boom
Inflation slightly exceeded the expectations in the industrial countries, but
remained below them in China. Nevertheless, the asset markets did
considerably better than expected. Ten-year government bond yields trade at
almost the same level as 12 months ago in the US, Japan and Germany, even
though nominal GDP growth accelerated significantly during the past year
(probably by more than 1 pp in the G7 countries).
Several European peripheral
countries (Portugal, Greece) even saw their yields decline palpably as political
risks receded. Important equity markets have gained between c. 5% (UK) and
almost 20% (US) during the year. The euro surprised to the upside; since April,
it has appreciated roughly 10% versus the US dollar and more than 5% in trade-
weighted terms.
EU Forecast
euf:ba18h:91/nws-01