Global credit impulse starting to turn

China still playing dominant role

Chart of the Day

The global credit impulse started to turn down in Q4, in part due to a weaker impulse from China and also due to another contraction in credit outstanding in the US following the surge in Q2. The credit impulse is a sign that credit conditions are getting easier or tighter, and often acts as a leading indicator for GDP growth and various asset prices. In this case, the credit impulse might not be as correlated with GDP growth as usual, because the normalization partly reflects firms paying back the emergency loans they took out during the peak of the pandemic and did not necessarily need.

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In the eurozone, the current account surplus is now larger than before the pandemic, despite edging down again in November.

Russia’s economy remains weak, but manufacturing confidence there points to a better outlook.

In Canada, the manufacturing sector is struggling to recover and has stagnated in recent months.


It’s not just Korea’s Kospi that has done well recently, following a further 2.7% gain yesterday, the Hong Kong Hang Send has this year recouped almost 10%-points of the ground it lost against the S&P 500 in 2020.

The forward price/earnings ratio of the S&P 500 is still much higher than for other major indices.

Likewise, the dividend ratio is much lower at just 2.1%, compared to 4.1% in the UK.

The elevated p/e ratio has not stopped US traders from speculating about the prospect for further gains, with the volume of call options outstanding jumping so far this year.

By contrast, traders are not so upbeat in the eurozone, and the put/call ratio has risen sharply.

Finally, the major cryptos continue to shake-off their recent falls, with ethereum jumping by 14% yesterday.

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