China Equities: More of the Same or Game changing Policies

September 9, 2024 9:15 AM UTC

 We remain strategically underweight China Equities in global and EM equity baskets, due to the structural slowing of growth and low EPS prospects. Event risk around the U.S. presidential election will also start to be considered.  Further targeted policies from China authorities could cause inter

U.S. August Employment - A little stronger than downwardly revised June and July

September 6, 2024 1:10 PM UTC

August’s non-farm payroll is a little weaker than expected with a 142k rise overall, 118k in the private sector, with significant negative back month revisions in the preceding two months totaling 86k. However the data is stronger than July’s, not only in the payroll, but also a correction lower

Eurozone: Sobering Services and Domestic Demand News is Food for ECB Doves

September 6, 2024 10:53 AM UTC

The fact that EZ growth was revised down a notch to 0.2% in Q2 is of little importance – it partly reflects a small recovery in imports that we have been flagging for some time would be a likely break on recorded activity.  Over and beyond more signs of slowing wage pressures in Q2 data, more not

U.S. August ISM Services - Still showing modest expansion

September 5, 2024 2:13 PM UTC

August’s ISM services index at 51.5 is almost unchanged from July’s 51.4 and implies an economy continuing to expand at a modest pace. Employment at 50.2 is down from July’s 51.1, but in being above the neutral 50 remains stronger than the readings seen from February through June.

A Harder Landing and the Fed

September 5, 2024 9:30 AM UTC

Though our baseline view is for a soft landing for the U.S. economy and the Fed cutting to 3.00-3.25% by end 2025 (here), uncertainty exists over the scale of the slowdown.  If the U.S. economy has a harder landing (stagnation/technical recession with 20-25% probability), then the Fed could likely

Eurozone: Labor Market Faltering

September 4, 2024 10:36 AM UTC

There are suggestions that worries about weaker growth are now reverberating within the ECB, albeit with the hawks still more mindful of service price resilience.  But the former worries chime with our long-standing concern of downside risk to what we still see is a below-consensus growth outlook,

Country Risk in MENA

September 3, 2024 10:00 AM UTC

Country risk in Middle East and North Africa is impacted by the ongoing war in Gaza, alongside reviews of Bahrain, Egypt, Iran and Qatar.     

China Harder Landing Scenario

September 2, 2024 10:55 AM UTC

 We see a 30% probability of a harder landing in China GDP growth in 2025, which we most likely be in the 3-4% region but could persist into 2026 (Figure 1).  A large than projected slowdown in consumption would be a key concern, alongside persistently moderate negative deductions from residential

U.S. July Personal Income and Spending - Core PCE Prices subdued, savings at a 2-year low

August 30, 2024 1:00 PM UTC

July’s PCE price data, up 0.2% both overall and core (with both subdued at 0.16% before rounding) is on consensus, as is a 0.5% increase in personal spending. Income at 0.3% is stronger than consensus, but still underperforms spending, leaving the savings rate at 2.9%, the lowest since June 2022.

Sub Sahara Africa: Country Risk Ratings

August 30, 2024 10:00 AM UTC

We provide country risk reviews for Sub Sahara Africa countries including Ethophia/Angola/Senegal/Sudan and Tunisia.  

Preview: Due August 30 - U.S. July Personal Income and Spending - PCE prices a close call between 0.1% and 0.2%

August 29, 2024 1:38 PM UTC

We expect July core PCE prices to be consistent with the core CPI, up by 0.2% but a little less before rounding. We expect a healthy 0.5% rise in personal spending to outperform a subdued 0.1% increase in personal income.

China Consumer Volatility

August 28, 2024 1:30 PM UTC

China consumption patterns are divergent; slowing and becoming more volatile at a sub sector level.  Less certainty over new employment and wage growth, plus wealth worries over housing are some of the causes.  We forecast GDP to slow in H2 and be 4.0% in 2025.

2024 Q2 Country Insights Scores to Download in Excel

August 28, 2024 9:00 AM UTC

The Country Insights Model is a comprehensive quantitative tool for assessing country and sovereign risk by measuring a country’s risk of external and domestic financial shocks and its ability to grow. The access to our full range of scores across 174 countries corresponding to the second quarter

U.S. July Durable Goods Orders - Aircraft surge inflated by seasonal adjustments, underlying picture subdued

August 26, 2024 12:49 PM UTC

July durable goods orders surged by 9.9% but this was fully due to a surge in aircraft which appears to be exaggerated by seasonal adjustments. Ex-transport orders maintained a fairly flat picture, with a dip of 0.2%, weaker than expected net of a downward revision to June to a 0.1% increase from 0.

Israel/Hezbollah War Risks

August 26, 2024 8:02 AM UTC

The probability of an Israel/Hezbollah war in the next 12 months has move up from low to modest probability, but would be a high impact event geopolitically and for global markets.  For global markets, a distinction would be drawn between an Israel/Hezbollah war that did not involve Iran/U.S. and o

Powell Jackson Hole Guidance

August 23, 2024 2:38 PM UTC

  Fed Powell clearly signaled a Sep 18 FOMC cut, but his analysis on the economy is softer than harder landing.  Though the option of 50bps was not ruled out, the comments from Powell and other Fed officials are more consistent with 25bps than 50bps.  Nevertheless, the Fed is now more focused on

Banxico Minutes: Cuts on the Table, Divided Board

August 23, 2024 1:02 PM UTC

Banxico has resumed its rate-cutting cycle, reducing the policy rate from 11% to 10.75%, with a split board decision. Most members noted weakening domestic activity and external volatility impacting the exchange rate. While some view the rise in non-core inflation as transitory, others see it, along

Mexico: FDI Increases but No Sign of Nearshoring

August 21, 2024 2:50 PM UTC

Mexico's FDI reached USD 31 billion in the first half of 2024, a 7% increase from 2023. However, this figure may be inflated by not accounting for USD inflation, potentially reducing real growth. While nearshoring discussions continue, current FDI largely reflects reinvestment by existing foreign fi

China Housing Bailout: More Needed

August 21, 2024 9:00 AM UTC

Though China’s authorities have taken some action to help the residential construction sector, the negative drags from the huge excess completed housing and uncompleted projects continues to weigh directly on the construction/steel and cement sector and consumer confidence. Aggressive policy actio

Fed Decision Making/H1 2025 Fiscal Tensions and Yield Curve Steepening

August 19, 2024 8:15 AM UTC

2yr U.S. Treasury yields can fall gradually by end 2025 to 3.25%, as a more neutral Fed Funds era is discounted.  10yr yields ability to decline on a soft landing is more difficult, given high net supply facing the market.  We also remain concerned that the U.S. will see some temporary fiscal stre

Mexico: Moving Towards Deficit as Expected

August 16, 2024 8:10 PM UTC

Mexico's fiscal situation is becoming challenging, with a primary deficit emerging due to increased support for PEMEX and overestimated growth projections. The Debt/GDP ratio is expected to rise to around 50.8% by 2024, possibly stabilizing around 49-54% depending on fiscal consolidation efforts. Wh

Preview: Due August 30 - U.S. July Personal Income and Spending - PCE prices a close call between 0.1% and 0.2%

August 15, 2024 3:15 PM UTC

We expect July core PCE prices to be consistent with the core CPI, up by 0.2% but a little less before rounding. We expect a healthy 0.5% rise in personal spending to outperform a subdued 0.1% increase in personal income.

U.S. July Retail Sales and Initial Claims show resilience, easing slowdown fears

August 15, 2024 12:52 PM UTC

July retail sales with a stronger than expected 1.0% increase shows the consumer still has some momentum at the start of Q3, while a dip in initial claims to 227k from 234k suggests the labor market is not seeing increased weakness in early August. August manufacturing surveys from the Philly Fed at

China Data: Soft Start to Q3

August 15, 2024 6:40 AM UTC

Overall, the July data is consistent with our forecast of a weaker H2 and we still look for 4.7% GDP growth for 2024.  The data is also consistent with our forecast of 4.0% in 2025 GDP growth.  Consumption behavior could stall further and cause more of a drag than we anticipate and we now see a 30

EM Markets Divergence with China Harder Landing Concerns

August 14, 2024 3:35 PM UTC

Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.  What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets

U.S. July CPI - Core below 0.2% before rounding for a third straight month

August 14, 2024 1:08 PM UTC

July CPI is consistent with inflationary pressures continuing to ease towards target with gains of 0.2% overall and ex food and energy as expected, but before rounding the gains were only 0.155% and 0.165% respectively.

Market Turbulence and What has Changed?

August 13, 2024 12:22 PM UTC

 •   We see the recent market turbulence as being partially a reduction in risky positions.  However, the U.S. economy is slowing and triggering a debate about a soft or harder landing (we see slowing rather than recession in our baseline), while EZ data shows the recovery is not gaining moment

India CPI Review: Cooling Inflation - Will India’s RBI Shift Gears?

August 13, 2024 8:02 AM UTC

India's inflation cooled to 3.54% yr/yr in July, marking its lowest in nearly five years and slipping below the RBI's 4% target. With food prices driving the decline, the central bank may now consider a rate cut. However, future inflation risks remain amid uncertain monsoon patterns and global price

FX Daily Strategy: Europe, August 13th

August 13, 2024 5:28 AM UTC

US PPI risks slightly on the downside
USD therefore has downside risks across the board
UK to see weakening in earnings data
GBP vulnerable against EUR

Chart EUR/CAD Update: Balanced in support area - prices remain under pressure

August 12, 2024 10:33 AM UTC

Little change, as prices extend pressure on support at the 1.4980 Fibonacci retracement and congestion around 1.5000

Despite Favourable Metrics RBI Committed to Tightening

August 11, 2024 5:03 PM UTC

The RBI will retained its stance of withdrawal of accomodation and maintained benchmark rate of 6.5% in its August meeting, staying on the path of inflation target. Concerns around high food inflation and geopolitical instability ensured that the RBI remained committed to its monetary tightening sta

FX Daily Strategy: Europe, August 8th

August 8, 2024 4:40 AM UTC

Light Thursday calendar with US jobless claims the highlight
JPY still undervalued
NOK and CAD have potential to extend gains

FX Daily Strategy: Europe, August 7th

August 7, 2024 4:44 AM UTC

More choppy risk sensitive trading seen
JPY downside looks very limited given low level and still low risk premia
CHF strength may be overdone unless there is stronger evidence of recession risk
AUD and NOK weakness may be overdone; GBP more vulnerable