MACRO HIGHLIGHTS。    Global Strategy - Asset Allocation - Binky Chadha。    A legacy of the financial crisis has been the narrative of a secular decline in ratesof return. But have rates of return declined? This is patently the case in fixedincome where government bond yields are near all-time lows and credit spreadsat mid- to late cycle tights. The US 10y yield has historically been a good predictorof subsequent total returns, so prospective returns look unambiguously low. Alonger history suggests bond yields are low but not unusually so. Yields werein a 2-5% range for 65years from 1900-1965; broke out above during the GreatInflation of 1966-1995; then reverted back into the “old normal” range.。    Europe Strategy - European Equity Strategy - Sebastian Raedler。    Macro: Flash Euro area composite PMI new orders rebounded to a six-year highof 56.3in September, up from 55.5in August and consistent with Euro area GDPgrowth of 3%+ (slide 6). However, PMI momentum – the six-month change inthe PMI and a key determinant of European equity market momentum – remainsclose to zero, having peaked at +4points in February. We think the current levelof the PMI is unlikely to be sustained, given that: (a) PMIs are consistent with GDPgrowth significantly above our economists’ forecasts (2.2% for this year, 2.0% for2018) and consensus (2.1% for 2017, 1.8% for 2018); and (b) the PMI has overshotthe level suggested by the Euro area credit impulse, which, at 0.1% of GDP, isconsistent with a PMI of 51. We expect the PMI to fade back to around 53byyear-end, consistent with our economists’ growth projections. This would implyPMI momentum turning negative over the coming months.。    Europe Strategy - UK Strategy - Jack Di-Lizia。    The BoE’s conviction for a November hike contained the caveats that (a) dataremained resilient and (b) political and EU Referendum uncertainty did notmaterially deteriorate. Data momentum has recovered from summer lows whilePM May’s speech last week, and the EU’s response, suggests there is now littleleft in the BoE’s way. With two hikes now priced by August-18, the very frontend is now excessively steep to measures of term premium and we exit the6m1Y-2Y1Y Sonia steepener。

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