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Industrial metals – at the beginning of a new super-cycle

Industrial metals are among the big winners of the COVID-19 crisis: in 2020 they gained an average of 20% and this year they have already achieved a double-digit performance (see Fig. 1). Not despite, but rather because of the virus, the fundamental outlook is very positive in the short to medium term. Although demand fell sharply in the course of the first lockdowns, many mine operators were also affected by COVID-related closures. Extreme inventory build-ups thus did not materialise. At

the same time, political decision-makers around the globe launched fiscal stimuli of unprecedented…

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UK GDP: rebound started in February, EU trade picks up

Signs of an early Spring this year for the UK economy: Monthly GDP data released today shows that a modest economic recovery started in February already. The ONS estimates that real GDP increased by 0.4% mom after declining by an upwardly revised -2.2% (from -2.9%) in January. As the whole of the UK remained under lockdown in February, with major parts of the economy such as non-essential retail, restaurants and bars, and entertainment still closed, the rebound probably reflects improving confidence underpinned by a rapid rollout of vaccines and a sustained drop in SARS-CoV-2 infections across…

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Systematic strategies have further potential to build up risk assets

The traditionally positive April seasonality seems to be showing itself again. Equity markets rose across the board, with US equities in particular making significant gains. In addition to the pause in the rise in bond yields, positive earnings revisions and economic surprises continued to be responsible for this. Latin American earnings estimates for the next 12 months have risen sharply, by more than 8 per cent in the last month alone. However, valuation levels have risen elsewhere, especially in the US, so it remains important that companies at least meet earnings expectations. Accordingly,…

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Tailwind continues for the time being

The equity markets recently reached new highs after vaccination successes in the US, the next massive US fiscal programme and continued loose monetary policy made investors increasingly optimistic as nothing more stands in the way of a global economic recovery. We keep our positive view as vaccination successes are still likely in Europe, the Q1 reporting season is expected to be positive, monetary and fiscal support is unabated and April has historically been a strong month for equities.

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UK: robust housing activity reflects more than policy stimulus

Strong momentum in the UK housing market

The policy-enhanced mini-boom in the UK housing market continued through March according to the latest RICS survey. The rise in the headline house price balance to 58.6% from 53.8% in February signals further strong gains in house prices as demand outstrips supply (Chart 1). The survey points to broad-based gains in housing market activity heading into Spring (all data refer to balances):

• Price expectations for the next three months rose to 42.4% from 15.9% in February – the highest since April 2014 (Chart 2)

• Sales expectations for the next three…

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German politics: the race is on

Who will succeed Angela Merkel as German chancellor after the 26 September national election? The two top parties vying to lead the next German government have both vowed to nominate their candidate between Easter and Pentecost (23 May). Whereas Merkel’s centre-right CDU/CSU is under pressure to settle the issue soon amid a major drop in public support, the Greens can take it easier. The choices which the two parties make in coming weeks could possibly make a decisive difference for what promises to be closely contested election in September. Both the CDU/CSU and the Greens have two potential…

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GlobalCapital ECM Awards: Berenberg best bank für Small Cap ECM once again

A lot of movement below the surface in equities

The constant alternation between growth concerns and reflation hopes has dominated the last few weeks and is likely to continue to characterise the coming months. Most recently, asset classes that had performed best since the beginning of the year tended to be among the biggest losers. Energy and financial stocks fell, as did oil and industrial metals, while defensive stocks and the US dollar celebrated a


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UK chart pack: rapid rebound, then back to the ‘old normal’

Overview - Chance for a UK revival

• The economic wheel of fortune seems to be turning back in the UK’s favour. A successful vaccine rollout, aggressive policy support and a solid global backdrop set the stage for at least two years of rapid economic rebound from the massive pandemic shock of 2020.

• UK real GDP collapsed by a historic 9.9% in 2020 as harsh restrictions to curb the spread of Sars-CoV-2 simultaneously crippled demand and supply.

• After a soft start to 2021 under the weight of continued restrictions and Brexit-related disruptions, we expect a…

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German conservatives: falling from grace

Mismanagement hurts: Last March, a deft response to the pandemic sent support for Chancellor Angela Merkel and her CDU/CSU almost into the stratosphere. Whereas Germany handled the first wave of the pandemic better than most other developed countries, this is no longer the case. Confusing policy shifts and slow vaccination progress have now undermined public confidence in the ability of the CDU/CSU, which has led the government for most of post-war history including the past 15 years, to steer Germany through the crisis. Against this backdrop, a kickback scandal involving CDU/CSU members of…

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The Berenberg Capital Markets Outlook │Wealth and Asset Management April

Compact outlook on capital markets, economics, stocks, bonds, commodities and currencies

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Eurozone PMI: better than expected but risks are looming

A nice surprise: March’s flash PMI data from IHS Markit showed a broad improvement in the manufacturing and the service sectors across the main European economies. Eurozone business activity returned to growth for the first time in six months. The composite PMI rose to 52.5 from 48.8 in the Eurozone, to 49.5 from 47 in France and to 56.8 from 51.1 in Germany. In the UK, the rapid vaccination progress contributed to a surge in the composite PMI to 56.6 from 49.6 led by the fastest increase in UK service activity since August 2020. A level above 50 signals an expansion and a level below 50…

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COVID-19 trends: update and slide pack


• A third wave: After a decline in January and February, confirmed SARS-CoV-2 infections are rising again in most continental European countries due to the rapid spread of more contagious variants (especially France and the Netherlands). In the Eurozone, the seven-day average of recorded daily infections has risen from 20 per 100,000 people in late February to 28 on 23 March. Fortunately, recorded new infections are rising less quickly than in November in most countries. The worsening situation in Europe is a cautionary tale for the United States where new variants are also…

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Eurozone consumption: rebound delayed

Ready to roar once lockdowns are eased: Across the advanced world, households are eager to spend more on consumer services once the pubs, shops and theatres are open again. By and large, consumers have the money to do so. We estimate that households in the Eurozone last year saved 50% more than in 2019 as lockdowns curtailed opportunities to spend, while government support kept real disposable incomes roughly constant. Of course, the surge in consumption will be less impressive in the Eurozone than in the US, where household savings doubled last year after record government transfers raised…

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Horizon Q2 2021

Hopes for a strong economic recovery must now be backed up by real growth. For markets to remain stable, this growth should neither be too weak nor too strong.

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Emerging markets debt: more room to run

2020 was as one of the most volatile years for emerging market (EM) debt, but in the end displayed the asset class’s resilience once again. High returns in the asset class are not easy to come by – navigating its volatility is the key – and 2020 was the

perfect example for it. The asset class suffered the worst quarterly drawdown in almost 20 years in the first quarter, only to be followed by its second-best quarterly return.

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UK consumer confidence rebounds, underpinned by strong finances

UK household confidence turned sharply higher in March, underpinned by rapid vaccine progress, solid balance sheets and improving expectations for the recovery.


• Headline consumer confidence jumped 7 points to -16, the highest level since March 2020 – Chart 1

• Households’ current financial situation reached a survey high of 31 while their view of the general economic situation for the next 12 months reached the best level since October 2016 (-17) – Chart 2

• Unemployment expectations declined from a still elevated level to 36 from 44 in March and a peak of 56 in July 2020 – Chart 3


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France: the return of Marine Le Pen

How much do we have to worry about Marine Le Pen? Some 13 months ahead of the French presidential election, the leader of the far-right National Rally is riding higher in opinion polls than ever before. As polls suggest that she would lose only narrowly to President Emmanuel Macron in a run-off vote, the tail risk that she may win is real. While it remains unlikely, we have to take it seriously. Fortunately, a Le Pen win would probably be less disruptive than it would have been in 2017. As she seems to have learned from her previous mistakes - and courtesy of the Brexit mess - the risk that…

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BoE emphasises upside risks, no pushback on higher yields

Improving outlook: Reacting to the rapid pace of vaccinations at home and the improving global backdrop, the BoE’s nine member Monetary Policy Committee’s (MPC) is turning more optimistic about the UK economic outlook. Crucially for markets, policymakers remained comfortable about the recent rise in gilt yields. Judging by the March meeting minutes, policymakers feel no urgency to lean against rising gilt yields with actions or words.


At the March meeting, policymakers voted unanimously in favour of keeping the bank rate at 0.1%, maintaining the stock of corporate bonds at £20bn, and…

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BoE preview: improved risk assessment may push yields higher

BoE policymakers meet this week against a backdrop of rapid vaccine progress at home and an improving global economic outlook. When the minutes are published at 12:00GMT on Thursday, financial markets will likely focus on the Monetary Policy Committee’s assessment of the recent rise in gilt yields. Since the previous meeting on 4 February, 10 year gilt yields have jumped 40bps to c0.8% - their highest level since December 2019. While the increase in benchmark rates reflects higher inflation and stronger real growth expectations, the move is associated with sharp losses for gilt holders as well…

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German politics: what the Greens are up to

Germany’s Green Party will most likely be part of the next German government after the 26 September 2021 federal election. We see a 20% probability that the next chancellor after Angela Merkel’s final term ends later this year will hail from the Greens. Although Merkel’s centre-right CDU/CSU remains the favourite to lead the next government (75% probability), we thus need to watch the Greens as closely as the CDU/CSU over the next few months.



First, like the CDU/CSU, the Greens have yet to decide – or disclose – who of their two…

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German election season starts with a bang


Some six months before the end of Angela Merkel’s final term as chancellor, Germany‘s election season has started with a bang. Support for Merkel’s centre-right CDU fell to historic lows in two state elections. A kickback scandal in the CDU/CSU parliamentary faction in Berlin and, to a lesser extent, rising discontent with slow vaccination progress and a somewhat confusing approach to an easing of lockdowns amid rising infection numbers have curtailed the support for the conservatives who had been riding high in opinion polls last summer. As many…

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Diversification benefit of U.S. government bonds now very low

Stock markets are currently torn between reflation optimism and inflation concerns. When bond yields rise, highly valued stocks fall and vice versa. The increased correlation between equities and bonds, as well as the increased volatility of bonds, has

meant that some systematic strategies, such as risk parity funds, have recently had to reduce their exposure to equities and bonds. The rotation from growth into value is likely to remain supported by momentum, at least in the short term - after all,

March 2020 now falls out of the rolling 12-month period, a month in which tech held up much…

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UK-EU trade: uncertain outlook after sudden BREXIT stop

Brexit hurts. Although it is still early days for the new UK-EU relationship, the January data on UK trade paint a clear picture: while the free trade agreement for goods that the UK and EU signed late last year has mostly brought an end to four and a half years of uncertainty, it does not hold a candle to free trade without paperwork and other non-tariff barriers that the UK once enjoyed as part of the single market.

The slump in cross border flows of goods in January between the UK and the EU highlights the negative impact of rising costs and frictions to trade now that the UK has left the…

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ECB puts its money where its mouth is

Reacting to the recent rise in bond yields, the ECB today announced that it will conduct asset purchases under its Pandemic Emergency Purchase Programme (PEPP) “over the next quarter … at significantly higher pace than during the first months of this year”.


Despite some verbal interventions against the sell-off in bond markets, the ECB had not raised its net asset purchases in the last few weeks. Financial markets were thus on the tip of their toes ahead of the ECB meeting. The ECB did not disappoint them. Instead, the clearly worded outright commitment to pump up the volume over the next…

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