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U.S. Economic Outlook under Trump
November 11, 2024 7:23 PM UTC
Uncertainty over how the U.S. election results will impact the economic outlook remains very high, but the evidence at present suggests that incoming President Donald Trump, assuming Republican control of the House is confirmed, will attempt to implement a substantial part of his campaign promises.
U.S. Election – Initial Thoughts
November 6, 2024 6:54 AM UTC
A Trump victory is now widely expected with results so far and has prompted knee jerk reaction in markets with U.S. Treasury yields and USD higher. Policy uncertainty is high over tariffs, though the 2017 tax cuts will likely be renewed with some additional tax cuts elsewhere -- House race is tigh
BRICS Summit 2024: Kazan Declaration not a Game Changer
October 28, 2024 11:41 AM UTC
Bottom Line: The BRICS Summit, which was held in Kazan on October 22-24, was the first summit following BRICS has expanded to include Ethiopia, Iran, Egypt and the United Arab Emirates. Despite expectations, Kazan deceleration, which was a joint statement signed after the summit, is not a game-chan
UK Budget Preview (Oct 30): More Tax and More Spend
October 21, 2024 11:30 AM UTC
With speculation that the Chancellor faces a £ 40 bln funding gap which will be addressed largely through tax rises, it seems as if the UK economy faces a larger fiscal tightening than was planned under the previous government. However, with promoting growth the policy priority, the Chancellor is
U.S. Tariffs on China: How and When?
November 13, 2024 9:55 AM UTC
The U.S. can put pressure on other countries by starting tariffs at a more moderate scale and country and industry specific and then credibly threatening to increase and broaden tariffs as it did in 2018-19 to get trade concessions from other countries. This also reduce the scale of the adverse in
China Yuan10trn Package: Shifting Debt Not Stimulus
November 11, 2024 10:06 AM UTC
Details of the Yuan10trn fiscal package show that it is all directed at a debt swap for LGFV’s and repackaging hidden local government debt. This will have little net fiscal stimulus. True fiscal stimulus will be seen for 2025 GDP growth, but it could be delayed until further details are seen
Brazil and Mexico Labour Productivity: A Headwind for Growth
November 19, 2024 12:03 PM UTC
Brazil and Mexico labour productivity has been stagnant in the last years, with both countries registering lower labour productivity levels than they were 12 years ago, with the gap with U.S. only widening. With both countries approaching full-employment, measures will need to be taken to foster gro
UK: Weak Growth – Don’t Blame It All on the Budget!
November 18, 2024 12:40 PM UTC
To suggest that the disappointing Q3 GDP data is largely down to apprehension about the Budget presented at the end of October is incomplete at best and misplaced at worst. After all, monthly GDP data suggest that the economy has not grown since May and by only 0.2% since March. These numbers ar
FX Daily Strategy: Asia, October 31st
October 30, 2024 10:00 PM UTC
BoJ meeting a key focus – some hawkish aspect needed to halt JPY decline
Longer term JPY buyers should see current levels as attractive
Eurozone CPI data should help consolidate EUR recovery
US data likely to be ignored ahead of employment report and election
U.S. Election Scenarios and Post-Election Policy Risks
October 30, 2024 8:14 AM UTC
The U.S. election remains very close though a win for former President Donald Trump appears slightly more likely than one for Vice President Kamala Harris. The race for control of the House is also close, though here a Democrat majority looks marginally more likely. For the Senate, a Republican majo
U.S. Equities: Exceptionalism v Valuations
November 20, 2024 10:05 AM UTC
Bottom Line: Momentum towards further deregulation, tech optimism, and the prospect of aggressive tax cuts could help the U.S. equity market in H1 2025 before the fear of higher yields and Fed Funds hurts in H2. 6100 could be seen H1 2025, before a softening to 5850 for end 2025 S&P500. We see
Germany: More Headwinds for an Ailing Economy?
November 7, 2024 9:10 AM UTC
After months of clear internal tensions, the three-party coalition collapsed on Wednesday after Chancellor Olaf Scholz (Social Democrat) sacked Finance Minister Christian Lindner (leader of the Free Democratic Party (FDP). The two had been seeing repeated rifts on spending and economic reforms, wi
U.S. October Employment - Special factors add to weakness, but trend looks less strong after revisions
November 1, 2024 1:27 PM UTC
October’s non-farm payroll is well below consensus with a 12k increase with weakness impacted by a strike at Boeing and hurricanes, though probably also in part due to a correction from an above trend September, and negative revisions make the trend going into this report less strong than it was.
UK Budget Review: Higher Taxes But Still a Marked Fiscal Boost
October 30, 2024 3:24 PM UTC
Despite a focus on hefty tax rises of some 1% of GDP, the Budget also sees borrowing rise by a similar amount so that a sizeable surge in government spending mean this is one of the largest fiscal loosenings in recent decades. But the boost to GDP growth is temporary and modest and where any impro
UK GDP Review: Momentum Dissipated?
November 15, 2024 7:58 AM UTC
The latest data, including that for the Q3, very much questions the UK’s economy’s apparent solidity, if not strength, as apparently seen in sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively. Indeed, GDP growth has been positive in only two of the last six
U.S. Government Debt and Deficit – How Much Does it Matter?
October 25, 2024 9:55 AM UTC
Post-election U.S. fiscal policy can still cause stress in the U.S. Treasury market given the unsustainable U.S. budget deficit and the high risk of a rating agency downgrade in H1 2025. However, 10yr U.S. Treasury yields above 4% now have a buffer and the prospect for Fed policy is also important
China Big Banking System: Lessons from Japan/GFC
October 24, 2024 10:50 AM UTC
The proposed Yuan1trn capital injection for the six largest banks would be pre-emptive, while China is also quick to merge weaker/failing small to mid-sized banks. However, rising NPL’s; plus, low net interest margins with low policy rates; low nominal GDP and pressure to rollover LGFV/SOE debt wi
Eurozone Q3 GDP Preview (Oct 30): (Near) Stagnation?
October 22, 2024 12:02 PM UTC
At best, the EZ economy is diverging ever more clearly as Germany falters while Spain prospers. However, the risks are that the whole of the EZ is weakening. Indeed, in contrast to ECB and consensus thinking of a second successive quarter of 0.2% q/q GDP growth, we see a clear risk that the EZ e
U.S.-Germany Yield Decoupling
November 18, 2024 9:25 AM UTC
We see scope for 10yr German Bund yields to remain close to current levels in the next 1-2 years, despite our new forecast of rising U.S. Treasury yields (here[MG(1] ). A weak economic recovery; fiscal consolidation rather than easing in the U.S. and less underlying inflation pressures should all
Russian Economy Grew by 2.9% YoY in September
October 31, 2024 10:51 AM UTC
Bottom Line: According to the preliminary figures announced by the Ministry of Economic Development, Russia's GDP expanded by 2.9% YoY in September driven by military spending and investments. Ministry of Economic Development significantly upgraded its GDP growth outlook to 3.9% from 2.8% for 2024
Eurozone GDP Review: Consumer Revival, Surveys Gloomier?
October 30, 2024 10:26 AM UTC
Even more clearly, the EZ economy is diverging as Germany stutters while Spain prospers. However, the risks are that the whole of the EZ is weakening given the possibly gloomier messages from business survey data. Admittedly, there were some upside surprises in the Q3 numbers, albeit with the un
Eurozone: ECB Stability Review Broadens the Case for Easier Policy
November 20, 2024 11:30 AM UTC
It seems that worries about weaker growth are reverberating more discernibly and more broadly within the ECB. Indeed, the worries may now be at least twofold. Clearly, weaker growth risks possible (added) downside risks to inflation, with BoI Governor Panetta yesterday warning that restrictive mon
U.S.-Gilt Yields and Fed v BOE policy
November 19, 2024 10:07 AM UTC
We see scope for 10yr UK yields to diverge from the U.S. despite our new forecast of rising U.S. Treasury yields (here). We feel that the BOE will ease by more than the Fed in 2025 and ease selectively in 2026 before and after our forecast of Fed Funds hikes. Meanwhile, the UK fiscal stance is l
FX Daily Strategy: N America, November 15th
November 15, 2024 10:12 AM UTC
US retail sales to maintain impression of solid US growth
USD should hold firm but gains becoming harder to make
AUD to outperform EUR
JPY weakness unlikely to turn without weaker US data or equities
GBP may see short term dip on GDP but EUR/GBP remains well offered
UK CPI Preview (Nov 20): Inflation Back Above Target But Core Pressures Lower
November 13, 2024 11:51 AM UTC
Helped by a fall in fuel prices and airfares, amplified by base effects, alongside some belated broader softening in services costs, UK inflation dropped to 1.7% in the September CPI (from 2.2%), thus falling below target for the first time since April 2021. This drop was greater than expected and
UK Labor Market – Private Payrolls Contract Amid Cost Pressures?
November 12, 2024 12:27 PM UTC
To suggest that the UK labor market is merely getting less tight misses the point entirely. Amid continued reservations about the accuracy of official labor market data produced by the ONS, alternative and very clearly more authoritative data on payrolls suggest that employment is continuing to co
FOMC eases by 25bps, statement avoids dovish hints
November 7, 2024 7:22 PM UTC
The FOMC has eased by 25bps as expected and the statement looks fairly similar to that released on September 18, when rates were cut by 50bps. However, changes in the statement suggest that the Fed has not seen any further reasons for dovishness since its September 18 meeting.
U.S. Yield Curve Steepens Then Flattening on 2026 Fed Tightening?
November 15, 2024 10:14 AM UTC
We see 10-2yr U.S. Treasury yield curve steepening in 2025, as the Fed keeps easing to 3.75% but the long-end is worried about medium-term issuance and the budget deficit trajectory being excessive. A moderate Fed tightening cycle in 2026 to curtail inflation from fiscal stimulus/tariffs should th