View:
Trump 2.0: Markets Guessing Policy Priorities
July 18, 2024 9:10 AM UTC
If Trump is elected president we still feel that the top priorities for implementation will likely be reducing immigration and making permanent tax cuts that are due to lapse in 2025. Trump would likely jawbone on all issues, but actual policy changes are more important for persistent moves in mar
UK Election Aftermath: Labour’s Solid Victory
July 5, 2024 5:24 AM UTC
Labour have won a large seat majority, though with a modest vote share. This should provide political stability in the UK for the next 5 years. The key question for market remains how the fiscal rule will be meet and how slowly or quickly Labour will take actions to boost long-term growth.
UK Markets After The Election: Will Labour Push for Growth Slowly or Quickly?
June 28, 2024 7:14 AM UTC
It is uncertain whether an incoming Labour government in the UK would slowly or quickly take action to boost trend growth and this is the most important question for post-election sentiment towards UK assets. For the Gilt market, the key is that the BOE actually starts cutting rates and that the 1
EZ: Is the Labor Market Starting to Labor?
July 3, 2024 10:51 AM UTC
With markets and policy makers very much focused on inflation, the EZ labor market continues to shine – apparently! Indeed, the EZ jobless rate has remains at a record-low of 6.4%, hinting at labor market tightness that will perturb ECB hawks wary of higher ensuing wage pressures. But this appar
Trump now Front-Runner for President
July 3, 2024 9:00 AM UTC
There is little sign yet that President Joe Biden is willing to step down after his disastrous debate performance though opinion polls will need to be watched for signs that the Democrats could do better with another candidate. The debate has left former President Donald Trump as the more likely, bu
Biden Drops Out, But Yield Curve Still to Steepen
July 22, 2024 8:10 AM UTC
President Joe Biden dropping out will create more uncertainty about the U.S. presidential race, but also crucially mean that the House of representative race is a close call. This could stall some Trump trades, though we still see a swing to a positive 10-2yr U.S. Treasury yield curve – given Fe
Inflation Heatwave: India's CPI and WPI Climb
July 15, 2024 6:35 PM UTC
India's inflation surged in June with wholesale prices hitting a 16-month high at 3.36% y/y, driven by soaring food costs. The CPI also rose to 5.1% y/y, reversing a five-month decline, prompting caution from the RBI, which anticipates inflation to ease as seasonal factors stabilise. Governor Shakti
France Gets PPP - Protracted Policy Paralysis?
July 8, 2024 6:46 AM UTC
French politics is getting used to surprises. After the unexpected snap election that saw the far right poll the most in the first round of parliamentary results last week, Sunday’s second round surprisingly saw President Macron's centrist forces perform more strongly than expected by coming in
China: Weak CPI and M2 Trends
July 10, 2024 7:27 AM UTC
China disinflation process is clear in the June CPI data, with excess production and soft consumer spending producing a lower than expected outcome. Combined with weak M2 money growth, parts of China economy remain weak and point to a softening of GDP growth in H2. However, policy action will li
ECB: Council Policy Reservations Deeper Than Expected?
July 4, 2024 12:23 PM UTC
The account of the June ECB Council meeting confirmed one dissent against the widely flagged 25 bp rate cut but also revealed perhaps clearer reservation among some other members about easing at that juncture. Indeed, there seemed to be disagreement about interpreting data; what is the basis for a
The Aussie Chapter 5: Kiwi, a tale of two cities
July 23, 2024 12:00 AM UTC
In "The Aussie", we will look into the "well-known "correlation among the Aussie and well-known benchmark to give our readers a closer look towards factors that have been affecting the movement of the Australian Dollar. In Chapter 4, we will look into the performance of the Aussie relative to the Ki
U.S. Household Wealth: Bottom 50% Need Income
July 17, 2024 9:00 AM UTC
Beneath the surface Federal Reserve data shows that the bottom 50% of households have little net wealth and they depend on employment income and government handouts. With excess post COVID government handouts having been largely exhausted, lower income households are starting to suffer from slowin
UK CPI Review: Inflation Stays at Target and Services Stay Resilient?
July 17, 2024 6:35 AM UTC
As has been made clear by policy-makers, labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle. In this regard the fact that headline CPI inflation dropped back to the 2% target in May is important but far from de
U.S. June CPI - Very soft, even if a few components look erratic
July 11, 2024 1:04 PM UTC
June CPI is even weaker than expected, down by 0.1% overall and up by only 0.1% ex food and energy, with the core increase before rounding only 0.065%, a sign that inflationary pressures have faded significantly since the bounce at the start of the year. Initial claims at 222k from 239k suggest the
EM After the Elections: Fiscal Focus and Inflation Questions
July 1, 2024 8:05 AM UTC
Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil. India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip
Short-End Gilts To Discount More Easing?
July 24, 2024 9:15 AM UTC
2yr Gilt yields will likely start declining further after the 1 BOE rate cut (we expect Aug 1), both as BOE communications guide to further cuts in the medium-term and as incoming wage and service inflation provides more comfort to reduce the scale of restrictive policy. We see 2yr Gilt yields at
ECB Review: Policy Window Stays Very Open
July 18, 2024 1:56 PM UTC
Maybe the ECB is now thinking that it was too clear at its April Council meeting that rate cut would occur subsequently in June, basically then suggesting that something would have to occur to prevent such a move. This time, with policy rates held as very much expected, the policy window was merel
Eurozone Banks See Consumer Loan Demand Recover
July 16, 2024 8:58 AM UTC
There were more positive straws in the wind in the latest (July 2024) bank lending survey (BLS), providing some reassurance for the ECB ahead of this week’s Council meeting. Most notable was a reported increase in demand for both housing loans and consumer credit for the first time since 2022 and
EZ and UK Government Bonds: Decoupling From the U.S.?
July 12, 2024 9:37 AM UTC
Different economic and inflation dynamics, plus no constraint from trade weighted exchange rates, means that the ECB and BOE can cut irrespective of the Fed in the coming quarters. This can see 2yr yields decline, though less so in Germany where a 2.5% ECB depo rate is already discounted. 10yr y
U.S. June Employment - Consistent with an economy growing below potential
July 5, 2024 12:59 PM UTC
June’s non-farm payroll is slightly stronger than expected in the overall gain of 206k, but with significant negative back month revisions of 111k, while private sector payrolls rose by a weaker than expected 136k. With average hourly earnings up a moderate on consensus 0.3% and unemployment up to
China: 3rd Plenum Incremental Not Game Changing
July 2, 2024 8:10 AM UTC
The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy. However, they are unlikely to be game changers, such as a Yuan2-4trn program of buying most unsold homes or structural increase in the unemployment/health and pension safety nets to free
China: The Squeezed Middle and Bottom 50%
July 23, 2024 8:15 AM UTC
Uncertainty over income and employment, adverse wealth effects from lower house prices, plus growing risk aversion, will likely mean that consumption continues to struggle. This is one of the key reasons why we forecast slower H2 GDP growth and look for 4% in 2025.
Preview: Due July 26 - U.S. June Personal Income and Spending - Another soft Core PCE Price Index
July 16, 2024 6:36 PM UTC
We expect a second straight 0.1% increase in June’s core PCE price index, this time consistent with June’s core CPI which followed a 0.2% increase in May. We also expect moderate gains of 0.3% in personal income and 0.2% in personal spending. The data will contain only a limited amount of fresh
U.S. Initial Claims rebound from a dip but July Philly Fed looks positive
July 18, 2024 1:01 PM UTC
Initial claims at 243k have bounced to the highest level since a matching number five weeks ago from last week’s 223k which was a six week low, restoring signs of labor market slowing. However July’s Philly Fed manufacturing index at 13.9 versus 1.3 is stronger than expected and backs some posit
France in the Fiscal Firing Line
July 16, 2024 7:31 AM UTC
EU finance ministers gather in Brussels today in a regular meeting but this time will discuss excessive fiscal deficits in various member countries, in particular, Belgium, France, Italy, Hungary and Poland. It is unclear just how specific any criticisms will be either in pointing out particular c
Prabowo's Economic Vision: Ambitious Targets and Fiscal Debates for 2025
July 15, 2024 4:22 PM UTC
Indonesia's parliament has set ambitious economic targets for 2025, tasking Bank Indonesia with strengthening the rupiah to USD/IDR 15,300-15,900. The parliament also set a GDP growth target of 5.3-5.6% and a fiscal deficit target of 2.29-2.82% of GDP. Despite revising the 2024 fiscal deficit to 2
EZ HICP Review (Jul 2): Disinflation Resumes Amid Services Resilience – July Cut Off Table?
July 2, 2024 9:33 AM UTC
The clear disinflation trend was still evident even after higher and higher-than-expected May numbers, where the headline moved up from 2.4% to a three-month high of 2.6%. That trend looks more discernible after the partial drop back to 2.5% seen in the June flash HICP, albeit with some far from r
UK Household Wealth and the Pension Predicament
July 22, 2024 12:44 PM UTC
Unlike some other parts of the DM world, UK households have seen a serious dent put into their stock of wealth in the last two years. Indeed, household net worth fell in both 2022 and 2023, both in absolute terms and also as a % GDP (Figure 1). The 2022 drop was very much a slump in pension fund
Banxico Minutes: More Slack Could Give Room for Rate Cuts
July 12, 2024 2:43 PM UTC
Banxico kept the policy rate unchanged at 11.0% but showed a slightly dovish tone, hinting at possible cuts in August. June's CPI figures revealed a widening gap between core and non-core inflation. Despite recent economic slowdowns and the MXN Peso's depreciation, Banxico expects economic slack to
Preview: Due July 25 - U.S. June Durable Goods Orders - Trend still close to flat
July 10, 2024 1:15 PM UTC
We expect June durable orders to increase by a modest 0.3% overall, ex transport and ex defense, following May data in which overall orders rose by 0.1% but ex transport fell by 0.1% and ex defense fell by 0.2%. This would keep trend close to flat.