Marketing material
Schroders Economic Infographic Feb 2015
European Central Bank
Investors
welcome ECB
announcement
of quantitative
easing
Chinese commodities
Interest rates
likely to remain
below inflation
€ 60bn spend
per month
until Sep 2016
ECB
Pros
Cons
Weaker euro
Benefiting
borrowers at the
cost of savers
Benefit to EZ economy
Also investors
should be careful
what they wish for
Investors may fund
public-private projects
in EZ = growth
Greek austerity
Benign outcome
Syriza fails
Troika negotiations
unsuccessful & Syriza unable
to deliver fiscal change
3.8%
Economy slows &
Greece avoids
recession
Coalition breaks down
3.5%
IMF
Economy
slows down
Syriza & Toika
fail to reach
compromise
No interest paid on Troika
debt
ECB liquidity funding to Greek
banks halted = run on banks
Greece leave currency union
= prolonged recession
Spill-over in international
bond markets
We are more
optimistic
and may
update our
growth
projections
next month.
Our optimism is due to:
Added austerity = small,
temporary recession
Further government
stimulus expected
2013
2014
2015
Despite optimism, implications for
commodities are not clear cut
Agriculture
Metal
Demand driven
by population
groth, not
economic growth
Stimulus expected
through
infrastructure
investment and
monetary easing
Oil
Stimulus through
infrastructure
investment and
monetary easing
Therefore
Greece continues to service
loans, but has to run a larger
surplus
Greek banks remain
supported by ECB and Greece
remains in the EZ
Underperformance
at 7.4% growth
However
Troika out,
no Grexit
Negotiation
stalemate with
no further credit
Target growth
7.5% for 2014
Oct 2014: IMF downgraded global growth
forecast from 3.8% to 3.5%
Syriza wins concessions
from the Troika in exchange
for continuing with austerity
Where to now?
ECB crowds out low-risk
investors
Inflation projection
Greece votes to end austerity
Grexit
ECB likely to buy
well-rated stable debt
China’s slowdown has led to hopes of
stimulus and optimism for commodities
Unaffected
by stimulus
Fall in oil
price
Lower energy
costs for
businesses &
consumers
Outweighs
costs of lower
CAPEX in
energy sector.
This has
added 270k
jobs since
2009
Global growth
stronger and
inflation low
Stimulus should
provide support
for demand &
prices
Marginally
positive however
other global factors
take precedence
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