The bank’s asset allocation team observes that evidence from the earnings season to date points to buyback activity picking up strongly during third quarter and continuing in the fourth quarter. Overall fund positioning remains neutral in equities and rates while long positions in the dollar delivered and hurt in oil and commodities.

Overall equity positioning remains close to neutral, while hedge fund owned, heavily shorted and small cap stock groups performed in line (and in the case of heavily shorted stocks, underperformed) the S&P 500 over the last week of October.

According to the report, in the current context of massive under-utilisation of productive capacity in the euro area, aggregate price stability is at risk. Beyond the one-offs affecting food or energy, growth in consumer prices is only ‘one shock away’ from turning into negative territory and the ECB is right to fight this scenario with its unconventional measures.

Normally, this would add substantially to inflation risks in countries at full employment such as Germany. However, in the absence of any reaction of wages and prices, German central bankers have signalled to the industrial partners that they would not object to higher wages in Germany.