China Equities: A Tactical Play

May 8, 2024 2:20 PM UTC

China equities can see a tactical bounce of 5-10% in the coming months.  Cheap valuations and  underweight global fund positions means that the scale of pessimism only has to get less bad on the economy and China authorities attitude towards businesses.  While we see a tactical opportunity, we do

U.S. Q2 GDP to Increase by 2.0% Annualized Before Slowing In the Second Half

May 8, 2024 1:36 PM UTC

In our quarterly outlook on March 22 we looked for Q1 US GDP to rise by 2.4% annualized followed by growth of near 1.0% in the remaining three quarters. While Q1 at 1.6% came in weaker than expected details were constructive for Q2 for which we now expect a 2.0% annualized gain. We continue to expec

Ukraine War Update: Major Russian Offensive is Expected This Summer Despite U.S. Military Aid

May 8, 2024 12:06 PM UTC

Bottom Line: The offensives at the front lines started to pick up steam after March/April as the Russian forces plan for their larger summer 2024 offensive operation, aiming to seize more territory before the U.S. presidential elections in November. In the meantime, U.S. approved a $61 billion warti

Sweden Riksbank Review: Biting the Bullet

May 8, 2024 8:24 AM UTC

It very much seemed to be a question of when, not if, as far as policy easing is concerned for the Riksbank.  In this regard, albeit surprising in terms of timing, the Riksbank delivered, cutting its policy rate by 25 bp (to 3.75%), despite clear concerns it has flagged about recent and continued k

U.S. Fiscal Problems: 2025 More Than 2024

May 7, 2024 1:10 PM UTC

Current real yields in the U.S. government bond market already large reflect the large government deficit trajectory.  Even so, H1 2025 could see some extra fiscal tensions that add 30-40bps to 10yr U.S. Treasury yields as the post president election environment will either see a reelected Joe Bide

Fed SLOOS on Bank Lending mostly resilient

May 6, 2024 6:27 PM UTC

The Fed’s Q2 Senior Loan Officer Opinion Survey on bank lending practices generally sustains a less negative tone seen in the last survey for Q1, and does not suggest that the Fed need to have any serious concerns about the business investment outlook. 

BCB Preview: 25bps or 50bps cut?

May 6, 2024 1:02 PM UTC

The Brazilian Central Bank (BCB) convenes on May 8 to set the policy rate. Previous forward guidance hinted at a 50bps cut in May, but recent statements from BCB President Roberto and some weakness in the BRL have shifted expectations to a 25bps cut. However, we anticipate the BCB maintaining a 50bp

Preview: Due May 15 - U.S. April Retail Sales - Pause after a strong month

May 3, 2024 5:00 PM UTC

After a 0.7% increase in March, we expect April retail sales to rise by only 0.3%. Ex autos we expect a 0.2% increase to follow a 1.1% rise in March, while ex autos and gasoline we expect sales to be unchanged after a 1.0% increase in March which was the strongest since October 2022.

Russian Economy Expands by 4.2% YoY in March, and 5.4% in Q1

May 3, 2024 2:14 PM UTC

Bottom Line: According to the figures announced by the Russian Ministry of Economic Development, Russia's GDP grew by 4.2% YoY in March owing to strong fiscal stimulus, high military spending, invigorating consumer demand and investments. We now foresee Russian economy will expand by 2.6% in 2024

U.S. April Employment - On the weak side in all key details, following strength in March

May 3, 2024 1:18 PM UTC

April’s non-farm payroll is on the low side of consensus across the board, with a 175k increase (though the 167k private sector rise is only modestly below consensus), with a 0.2% rise in average hourly earnings, a fall in the workweek and a rise in unemployment to 3.9% from 3.8%. The data should

EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Norges Bank Review: Even More Caution?

May 3, 2024 8:46 AM UTC

Surprising few, the Norges Bank Board left the policy rate at 4.5% for a third successive meeting at its latest Board meeting.  It also retained the thinking first aired at the December meeting, namely ‘policy to stay on hold for some time ahead’ rhetoric, this more formally evident in what wer

Turkiye’s Inflation Continues to Jump in April with 69.8%

May 3, 2024 7:40 AM UTC

Bottom Line: Turkish Statistical Institute (TUIK) announced on May 3 that Turkish CPI ticked up 69.8% annually and 3.2% monthly in April due to increases in transportation, restaurant & hotel and education prices, coupled with the lingering impacts of the wage hikes on the services sector. We feel u

Moody’s Improves Outlook Perspective Due to Higher Growth

May 2, 2024 2:27 PM UTC

Moody’s upgraded Brazil's outlook to positive from stable, maintaining its Ba2 rating, signaling a potential move to Ba1 soon. Strong growth prospects, attributed to institutional reforms, drove this shift. Despite lingering doubts, improved fiscal conditions and anticipated tax reform are bolster

Preview: Due May 3 - U.S. April Employment (Non-Farm Payrolls) - Still strong if a little less so, earnings may be above trend

May 2, 2024 2:03 PM UTC

We expect a 255k increase in April’s non-farm payroll, still strong if the slowest since November, with a 195k increase in the private sector. We expect an unchanged unemployment rate of 3.8% and a slightly above trend 0.4% increase in average hourly earnings, lifted by a minimum wage hike in Cali

U.S. Unit Labor Costs and Initial Claims suggest inflationary risk from labor market strength

May 2, 2024 12:56 PM UTC

Initial claims at 208k are unchanged at a very low level while continued claims at 1774k are also unchanged, the preceding data revised from 207k and 1781k respectively. The labor market remains tight while unit labor costs saw a significant bounce to 4.7% annualized in Q1.

BoE Preview (May 9): Easing Bias Clearer?

May 2, 2024 11:06 AM UTC

In flagging no need to be dominated by Fed policy, we think that the BoE is not only moving towards rate cuts but the MPC majority may be overtly advertising such a likelihood.  But we do not see any move at the looming May 9 verdict, with Bank Rate again likely to remain at 5.25%. But the accompan

China Politburo: Help for Housing, But No Game changers

May 2, 2024 10:50 AM UTC

Politburo statement in late April suggests extra support for residential property.  However, we see this as being incremental rather than any game changers and we still see residential investment remaining a negative drag on 2024 GDP growth.

FOMC Still Waiting For Data to Justify Easing

May 1, 2024 7:58 PM UTC

The May 1 FOMC statement, and Chairman Jerome Powell’s press conference, while noting recent inflation disappointment, did not deliver a strong pivot in tone. The Fed is still waiting for data to allow easing to take place, but still expects inflation to slow, and looks ready to respond once data

South Africa’s Fiscal Outlook Under Spotlights as the Elections Are Approaching

May 1, 2024 6:45 PM UTC

Bottom line: South Africa policy makers remain concerned about government debt trajectory, large domestic and international financing needs and elevated country risk premium before fast-approaching elections on May 29. We think South Africa’s general government fiscal balance and debt trajectory w

FOMC Notes Lack of Further Inflation Progress, QT to be Tapered in June

May 1, 2024 6:27 PM UTC

The FOMC has left rates at 5.25%-5.50% as expected and added to its statement that in recent months there has been a lack of further progress towards the 2% inflation objective. Otherwise the changes to the statement were fairly minor other than announcing a slowing in the pace of balance sheet redu

Sweden Riksbank Preview (May 8): When, Not If?

May 1, 2024 8:09 AM UTC

It seems to be a question of when, not if as far as policy easing is concerned.  Even at it previous policy assessment in February it was clear(er) that the Riksbank accepted that it could and should make its policy stance less contractionary, at least in conventional terms.  But its last decision

Mexico GDP Review: 0.2% Growth but Still Subpar

April 30, 2024 5:54 PM UTC

INEGI released Mexico's Preliminary GDP for Q1 2024, showing 0.2% growth, slightly above expectations. Annual GDP slowed to 2.0% from 2.8% in Q4 2023. The economy is losing momentum due to tight monetary policy and weakened U.S. demand. Agriculture contracted by 1.1%, Industry by 0.4%, while Service

Preview: Due May 15 - U.S. April CPI - Core rate not quite as strong as the preceding three months

April 30, 2024 5:15 PM UTC

We expect April CPI to rise by 0.4% overall for a third straight month but with the ex food and energy pace slowing to 0.3% after three straight months at 0.4%. We expect the strong start to the year to fade as the year progresses, though inflationary pressures will still look quite significant in A

UK GDP Preview (May 10): Fragile Sideways-Moving Activity Continues?

April 30, 2024 2:19 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

Eurozone Data Review: Less Weak But Soft Domestic Demand Taking Less Toll on Core Inflation?

April 30, 2024 9:29 AM UTC

According to revised official national accounts data, the EZ economy was in recession in H2 last year, albeit modestly so and against a backdrop of marked, if not increasing, national growth divergences. This geographical variation continued into Q1 (Figure 1) where the flash GDP reading exceeded ex

UK Consumers: Rent the Growing Hit to Spending Power

April 29, 2024 2:02 PM UTC

The UK has faced a series of cost-of-living shocks in the last few years.  Some such as the surge in food prices may even be reversing, while it now looks likely the BoE hiking cycle may also start to reverse, although rising market rates may mean little further fall in effective mortgage rates in

China: Depreciation Rather Than Devaluation

April 29, 2024 1:00 PM UTC

We feel that a devaluation of the Yuan is unlikely in 2024, both to avoid potentially politically destabilizing capital outflows but also to avoid upsetting the next U.S. president.  Policy is geared more towards controlled depreciation to help competiveness but reduce other risks.  The Yuan has a

Argentina: Activity is Shrinking but that is the Price to Stabilize

April 26, 2024 5:52 PM UTC

The INDEC data for February reveals a 0.2% economic shrinkage, signalling a 5.1% drop since August 2023, potentially leading to a Q1 2024 recession. High inflation and fiscal adjustments are primary causes. Some foresee 0% April inflation due to price realignment and stable ARS. Despite low reserves

Brazil: Credit Decelerating Amid Tighter Conditions

April 26, 2024 1:21 PM UTC

Despite the BCB's initiation of the cutting cycle, credit is anticipated to decelerate due to monetary policy lags. Enterprises face the most significant impact, with nominal growth dropping to 4.1% in February from 12.1% a year prior. While household credit growth slows to 10.4% annually from 17%,

CBR Kept the Key Rate Stable at 16%

April 26, 2024 1:12 PM UTC

Bottom Line: As widely expected, Central Bank of Russia (CBR) announced on April 26 that it decided to keep the policy rate unchanged at 16% for the third meeting in a row. CBR made critical changes in its key rate and inflation forecasts as it lifted its 2024 inflation forecast to 4.3-4.8% from 4-4

FOMC Preview For May 1: Signaling Concern on Inflation, Tapering Quantitative Tightening

April 25, 2024 7:04 PM UTC

Bottom Line: The FOMC meets on May 1 and rates look sure to remain at the current 5.25%-5.50% target range. The statement is likely to see some adjustments to reflect recent disappointment on inflation while repeating that more confidence on inflation moving towards target is needed before easing. I

CBRT Kept Key Rate Unchanged at 50%

April 25, 2024 3:25 PM UTC

Bottom Line: As predictions were centred around no change, Central Bank of Turkiye (CBRT) kept the policy rate stable at 50% on April 25 despite galloping inflation, and pressure on FX lately. According to the CBRT statement, monetary policy stance will be tightened in case a significant and persist

Q1 U.S. GDP Slows on Imports and Inventories, Core PCE Prices Stronger on the Quarter

April 25, 2024 1:14 PM UTC

Q4 GDP has come in weaker than expected at 1.6% annualized but with a stronger than expected 3.7% annualized increase in the core PCE price index. Weaker inventories and stronger imports are the main reason for the GDP slowing so the data is not a clear signal of underlying weakness. Lower initial (

Norges Bank Preview: Nothing New to Note?

April 25, 2024 9:29 AM UTC

Surprising few, the Norges Bank Board is very likely to leave its policy rate at 4.5% for a third successive meeting when it gives it next verdict on May 3.  It is also likely to retain the thinking first aired at the December meeting, namely the ‘policy to stay on hold for some time ahead’ rhe

Bank of Canada Minutes Look to Gradual Easing, Divided on When to Start

April 24, 2024 6:44 PM UTC

Bank of Canada minutes from the April 10 meeting confirm a greater confidence on inflation falling, though there is disagreement within the Governing Council over when policy easing will become appropriate. There was agreement that easing would probably be gradual given the risks to the outlook and

Brazil: Wage Inflation Will Likely Not Be a Big Deal

April 24, 2024 3:19 PM UTC

Our analysis delves into recent trends in the Brazilian labor market, focusing on CPI and wage inflation. Utilizing a model akin to Ghomi et al. (2024) and Blanchard and Bernanke (2023), we dissect recent spikes in wage inflation and CPI growth. Notably, our findings suggest that recent wage spikes

Preview: Due April 25 - U.S. Q1 GDP - Slower but Still Healthy With Stronger Core PCE Prices

April 24, 2024 1:54 PM UTC

We expect a 2.4% annualized increase in Q1 GDP, significantly slower than the second half of 2023 but slightly stronger than the first half and still a heathy pace of growth. We expect a pick up in the core PCE price index to 3.4% annualized after two straight quarters at 2.0%.

Eurozone GDP Preview (Apr 30): Less Weak?

April 24, 2024 11:06 AM UTC

According to revised official national accounts data, the EZ economy was in recession in H2 last year, albeit modestly so and against a backdrop of marked, if not increasing, national growth divergences. This geographical variation is likely to have continued into Q1 (Figure 1) where we see a flat o

China: Surging Government Debt and Does It Matter?

April 24, 2024 9:30 AM UTC

Total non-financial sector debt, plus the IMF estimates of government debt/GDP, do seem to matter for the action of China authorities, as fiscal policy stimulus is targeted rather aggressive as in 2009 or 2015.  The overall debt picture also matters for the growth outlook, as the excess debt/GDP le

Sticky Inflation Causes Concerns over the Horizon

April 24, 2024 9:26 AM UTC

Bottom line: According to the Monetary Policy Review Report by the South African Reserve Bank (SARB) on April 23, the risk of higher inflation still remains and inflation returning to the midpoint of the target band is only expected in the last quarter of 2025. SARB highlighted in its report that ma

EZ HICP Preview (Apr 30): Core Disinflation Signs to Flatten Out Further?

April 23, 2024 9:43 AM UTC

Very much having affected ECB thinking, there has been repeated positive EZ news in the form of falling EZ HICP inflation and somewhat broadly so. This continued in the March HICP numbers, with the 0.2 ppt drops in both headline and core being a notch more sizeable than most anticipated. Regardless,

Country Risk in MENA

April 23, 2024 9:00 AM UTC

Country risk in Middle East and North Africa is impacted by the ongoing war in Gaza.     

Preview: Due May 3 - U.S. April Employment (Non-Farm Payrolls) - Still strong if a little less so, earnings may be above trend

April 22, 2024 4:44 PM UTC

We expect a 255k increase in April’s non-farm payroll, still strong if the slowest since November, with a 195k increase in the private sector. We expect an unchanged unemployment rate of 3.8% and a slightly above trend 0.4% increase in average hourly earnings, lifted by a minimum wage hike in Cali

Indonesian Court Delivers Verdict: Prabowo prevails

April 22, 2024 3:18 PM UTC

The Constitutional Court dismissed cases against Vice President Gibran Rakabuming Raka and President Joko Widodo. In Gibran's case, the court didn't disqualify him from running for president but sanctioned the election committee for not amending regulations following a previous ruling. This ruling l

Short-end European Government Bonds Following U.S. But June Decoupling

April 22, 2024 1:15 PM UTC

The Fed’s shift to higher for longer has spilled over to drag European government bond yields higher through April.  This now looks overdone as a June ECB rate cut is not fully discounted and ECB officials/data clearly point towards a 25bps cut.  UK money markets are more out of line, with a Jun