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The Week Ahead - 16 - 20 December 2024
These are the Key Macro Events for the upcoming week.
ECB signals it is on the road to normal
The ECB cut its key policy rates by 25bp, taking the deposit rate to 3%. The move was widely expected and priced in by financial markets. The communication around the rate cut suggests that the Governing Council is comfortable with the idea of bringing policy rates back to neutral levels, if its outlook continues to be confirmed.
ESG Economist - New NGFS scenarios: more damage, less time
In November, the Network for Greening Financial Services (NGFS) published the fifth vintage of its climate scenarios. The new NGFS scenarios have been updated taking into account the most recent developments and the country-level commitments as they stood in March 2024. A new damage function has been applied incorporating the most recent insights into physical risk damages.
Economic Outlook 2025 - Webinar - The year of the tariff
Video of ABN AMRO's Group Economics webinar on the economic outlook for 2025.
ESG Strategist - Higher climate risks do not yet translate into steeper credit curves
In this piece, we look at all issuers included in the Bloomberg euro corporate bond index (excl. financials) and assess whether companies more vulnerable to climate-related risks – physical or transition - also experience steeper credit curves
Carbon Market Strategist - Market bullishness is back
EUA prices have been trending upward following the rally in gas prices which boosted the profitability of coal power generation. Allowances demand for industrial purposes remains low on the back of weak recovery . The bullish sentiment is back to dominate the market for the first time in 16 months driven by the rising uncertainty in European gas markets . The EUA market may still witness a temporary surge in demand around the year end following the yearly break in primary markets. Our outlook for December and January is slightly bullish, where we expect the EUA price to range between 68 and 73 €/tCO2. In 2025, we expect prices to cool down at the beginning of the year before regaining momentum in the second half of 2025.
The week ahead - 9 - 13 December 2024
These are the Key Macro Events for the upcoming week.
Global manufacturing shows further improvement
Global manufacturing PMI rises back to ‘neutral’. EM outperformance continues, Demand picks up (also driven by EMs), and global excess supply continues. Subcomponents for input and output prices up, but remain far below 2021/22 peaks.
ESG Strategist - Are credit rating agencies overlooking climate risks?
Climate risks are mounting across the world and Europe is not immune to this global development. The devastating floods in Valencia and the wildfires in Portugal are just recent examples of a phenomena that is expected to become increasingly frequent. As it was noted in our previous research (see [1]), acute physical risks – such as floods, or wildfires – can result in significant direct economic damages, such as the loss of buildings, livestock, natural resources and infrastructure, which in most instances is only partly insured. Moreover, climate-related disasters can also have longer-term impact on economic growth. These can ultimately affect the ability of a country to repay its debt, such that climate-related risks should be – if not already - considered by credit rating agencies. Hence, in this note, we aim to dive deeper into sovereign ratings, in order to understand whether climate-related indicators are accounted for by rating agencies when assessing country risks. We solely focus on climate-related indicators, given that past research has proven that the social and governance pillars (the other components within the E, S and G) remain the biggest drivers of sovereign risk premia (the exception being low-income countries where some environmental variables stand at the forefront - see [2]). This note is structured as follows: below we discuss the data and the methodology used, followed by our interpretation of results. Finally, we finish the note by offering conclusions.
Macro Watch - Tight labour market dampens economic growth potential
The active labour force has been growing steadily, but too slowly to meet all labour demand. Many vacancies are outstanding and business owners indicate in surveys that lack of staff is their biggest obstacle. The tightness in the labour market will continue for the time being, as the pool of people who can find work is small. The number of unemployed is low, the schedules of part-time workers who say they would like to work more hours do not necessarily match employers' work schedules, and those who are in the labour force but not in paid employment often have other commitments, such as study or informal care, or are kept from work by illness. The labour market is also at risk of remaining tight in the longer term due to an ageing population. With an increasingly weak increase in labour supply, the economy will grow more slowly and GDP growth per capita will weaken. This leaves less room to share the pain of social change. Where some citizens gain from a policy adjustment, others lose out. This will make it more difficult to implement reforms in the future.