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German Ifo falls by less than expected

Less bad than expected: In response to a renewed partial lockdown in November and the likely extension if not tightening of restrictions until 20 December, German business climate soured for the second consecutive month in November according to the Ifo survey. But in line with the German PMIs yesterday, the Ifo data held up better than expected.

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European PMIs: November setback smaller than in spring

The second lockdowns are significantly weighing on economic activity in Europe, but much less so than the first lockdowns did in March and April. While the major setback in the European PMIs suggests that November is a month to forget, markets have good reasons to largely look through the data.

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Some assets up in 2020, others with catch-up potential

The optimists have gained the upper hand on the stock market. A market-friendly US election outcome, encouraging vaccine news and ready central banks have significantly improved investor sentiment and led to a rotation from Covid-19 winners

(tech, gold, safe government bonds) to Covid-19 losers (value sectors, cyclical commodities). Equity funds have recently recorded the largest inflow ever measured over two weeks with more than USD 70 billion. The market seems to be looking

through the current expected growth dip and focusing on the synchronous economic recovery next year. USD 4.3 trillion…

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European update: growth, Covid-19, fiscal deal, Brexit

Despite serious near-term risks, the overall balance of risks for 2021 is tilting to the upside courtesy of Joe Biden, vaccine hopes and some progress on European fiscal issues. Once the second wave of the pandemic has run its course, the growth outlook will likely be unusually positive for the European continent in 2021 and 2022.

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Eurozone inflation: an even stronger case for the ECB to act

Despite the record-breaking rebound of the Eurozone economy in the summer months from the mega-recession in March/April, inflation pressures remained very subdued in October, that is just before major parts of Europe tightened restrictions or imposed new lockdowns to contain the second wave of corona infections.

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EU summit preview: €1.8trn deal at risk?

EU leaders will have three tough nuts to crack at their virtual summit this Thursday: the EU’s financial future, a more coordinated approach to the second wave of the corona pandemic, and the chances for a modest post-Brexit deal with the UK. The first of these three will shape the future of the EU even more than the two other issues.

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On our research portal

As required, we publish in-depth analyses on important individual topics and long-term outlooks such as the Euro Plus Monitor or Strategy 2030.

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COVID-19 in Europe: weekly update and slidepack

Infection numbers are falling in major parts of continental Europe: After an almost exponential surge in recorded SARS-CoV-2 infections from early October until early November across continental Europe, case numbers have rolled over in some heavily affected countries and have started to stabilise in some others.

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Small caps, big returns?

The Nobel laureates Eugene Fama and Kenneth French proved the existence of the “size” or “small cap” premium in 1993. The rationale behind the Fama-French three-factor model is that small caps – which we define as companies with a market

capitalisation of €500m to €5bn – are riskier and more illiquid than large companies. Small caps should, therefore, offer investors additional returns for taking on this risk. Other studies have shown that small caps generate an excess return in the long

term, even when adjusted for risk.

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ECB: greener and even more supportive

Last week, I took part in the European Central Bank’s annual “Forum on Central Banking”, this time held virtually rather than at Sintra.

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Increasing cyclical tailwind

The market-friendly outcome of the US elections and then the positive COVID-19 vaccine news made investors look for risk again. Both events led to a decrease in uncertainty and volatility. Share prices rose significantly.

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COVID-19 in Europe: weekly update and slidepack

After an almost exponential surge in recorded SARS-CoV-2 infections since early October across Europe, first signs of a potential turnaround are appearing in some heavily affected countries

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Why 2021 could be a good year for Europe

After the trade turmoil of 2019 and the pandemic of 2020, 2021 could turn into an unusually good year for Europe. Four conditions required for such a positive scenario are now either within reach or could plausibly be met within a few months:

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Unemployment edges higher, but some signs of hope

Softening the blow: The damage to UK labour market from the historic coronavirus recession in Spring remained modest in September thanks to the government’s CJRS (Coronavirus Jobs Retention Scheme).

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ZEW survey: significant setback, but medium-term is positive

The significant surge of Covid-19 infections and restrictions over the past weeks has dealt a heavy blow to economic sentiment in Europe according to the ZEW survey. The rebound from the mega-recession in spring is officially over.

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Macro update: Biden, US-EU trade, pandemic

Joe Biden has won the presidency according to major US media. Whether the Republicans will defend their majority in the Senate depends on the outcome of two run-off votes in Georgia on 5 January.

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Democratic president and legislative gridlock best scenario

Stock markets have responded to the US elections with relief. One reason for this, apart from the reduction of hedges, may have been that the election result (president Biden, divided Congress) essentially secures the status quo but with less political

tension. The tone in trade and foreign policy should become more diplomatic. Moreover, a majority in the Republican Senate is likely to limit significant changes in tax and spending policies.

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US elections update

Joe Biden wins the White House, Congress remains divided. This is now the most likely outcome of the US election.

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BoE extends asset purchases, signals more if needed

A well judged upside surprise: Reacting to the shock from the second lockdown, the Bank of England (BoE) today announced additional stimulus to support medium-term growth and inflation expectations. The Bank decided to purchase slightly more additional assets than we and the market had expected (£150bn versus £100bn).

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The Berenberg Capital Markets Outlook│Wealth and Asset Management

Compact outlook on capital markets, economics, stocks, bonds, commodities and currencies. New every month.

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Markets typically perform well after US election

The Covid-19 crisis has recently worsened, particularly in Europe. In Asia, and above all in China, the situation looks much better. In the third quarter, the second-largest economy grew by 4.9 percent year on year. At the same time, Joe Biden was able to improve in the election polls over the last two months, even if his lead over Trump has recently declined slightly. One of the beneficiaries of this development were emerging market equities, which significantly outperformed developed market equities in the last four weeks, also driven by increased fund inflows. On the surface, not much has…

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Seasonality - best period for equities is just around the corner

October has so far been much better than September; and the second half of October is even more positive for stock markets, at least historically speaking.

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Return potential despite volatility

Volatility on the stock markets remains high. In September, the VIX volatility index for US equities remained above 25%. Looking ahead, the important developments are the US presidential election, vaccine news and the Q3 reporting season, which has already begun.

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Probability of rapid, broad vaccine availability slightly reduced

The volatility of equities has recently increased. The US Federal Reserve is maintaining its position and points out that fiscal policy should now provide impetus for the US economy. However, Democrats and Republicans cannot agree on a further stimulus package. A compromise before the US elections now seems increasingly unlikely. The so-called ‘superforecasters’ put the probability of a deal before the elections at less than 20%. In addition, they have moved their forecasts for a rapid vaccine approval and distribution slightly into the future. This, together with the increased COVID-19…

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