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May 13, 2025

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Markets: Less U.S. Recession Risk, But Trade Headwinds
Paying Article

May 13, 2025 9:38 AM UTC

Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated.  Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%.  In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t

May 12, 2025

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Trump Tariffs: China and UK Precedents
Paying Article

May 12, 2025 8:02 AM UTC

 The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days.  Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this.  This is in line with our previous thinki

May 08, 2025

USD flows: Trump lifts equites and USD, though signals are mixed
Paying Article

May 8, 2025 4:09 PM UTC

The US-UK trade deal is underwhelming, if welcome. Trump’s suggestion that tariffs on China could be lowered if talks scheduled this weekend go well is giving the USD a more significant lift, though Trump continues to give mixed signals, making tariff threats alongside a suggestion that equities b

May 07, 2025

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China Moderate Triple Monetary Easing
Paying Article

May 7, 2025 6:31 AM UTC

•    China has announced a 10bps cut in the 7 day reverse repo rate to 1.4%; large than expected 50bps cut in the RRR rate and credit easing via Yuan1.1trn balance sheet quota expansion to counter the slowdown in growth.  Combined with the extra equity capital for state banks this will help c

May 06, 2025

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Tariff Man
Paying Article

May 6, 2025 8:45 AM UTC

  With the U.S. equity market having rebounded, President Donald Trump instinct on tariffs have seen threats of pharma tariffs and a 100% tariff on non U.S. films. Slow progress is also reported on bilateral deals, despite White House PR spin.  However, Trump will see pressure rising from three so

May 05, 2025

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Markets: China Truce Hopes and More Data
Paying Article

May 5, 2025 8:05 AM UTC

The direction of travel is towards a U.S./China truce followed by postponing/cancelling most reciprocal tariffs and then trade negotiations. While the markets could cheer this as good news, incoming economic data in May and June is the most critical issue.  We still see the U.S. imposing an average

April 30, 2025

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China South China Sea Tensions
Paying Article

April 30, 2025 10:30 AM UTC

We see recent China activity as part of the normal grey warfare for long-term influence in the South China sea.  It has involved the use of China coastguard and militia fishing boats rather than China PLA Navy, though the risk of escalation between the Philippines and China remains. China likely wa

April 28, 2025

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US Exit: Lessons From Brexit?
Paying Article

April 28, 2025 8:05 AM UTC

Overall, the U.S. attempt to reshape global trade is unlikely to significantly improve its trade position, but the size and influence of the U.S. may mean it does not get hit in net exports volumes like the UK.  Even so, U.S. business investment could be restrained by ongoing uncertainty from the T

April 25, 2025

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U.S/China Trade Standoff: Odds Remain Towards Truce
Paying Article

April 25, 2025 7:09 AM UTC

  On balance, our baseline still remains a U.S./China trade deal (55-60%) being reached, given Trump deal instincts; China desire for a deal and the economic disadvantage of an economic cold war to the U.S. when it is trying to reset trade with all countries.  Timeline is Q4 2025 or H1 2026. An al

April 24, 2025

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USD Rebalancing: Some to EM?
Paying Article

April 24, 2025 8:30 AM UTC

Some portfolios rotations towards EM assets will likely be evident, as we see the USD decline is now extending and broadening.  However, flows will likely be selective, both given underwhelming EM performance in the last 5-10 years and the uncertainty over how much Trump will reduce reciprocal tari

April 23, 2025

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Trump Under Pressure
Paying Article

April 23, 2025 7:15 AM UTC

A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals.  However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired

April 22, 2025

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Foreign Official U.S. Treasury Holders: The Kindness of Strangers
Paying Article

April 22, 2025 7:30 AM UTC

Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade.  Neverth

April 17, 2025

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Safe Havens Other Than the USD
Paying Article

April 17, 2025 8:30 AM UTC

The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics.  We prefer Ind

April 16, 2025

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China GDP: Good Q1 Start, but 2025 Could Be 4.2% or 3.3%
Paying Article

April 16, 2025 8:24 AM UTC

•    The March data releases from China alongside the Q1 GDP figures show a good start for 2025.  However, underlying domestic demand is soft and Q2 will see a big hit from the U.S. tariffs already introduced.  Our baseline (here) remains for a truce in the coming weeks and a scale back of 1

April 15, 2025

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Nervous U.S. Long Term Asset Holders
Paying Article

April 15, 2025 8:30 AM UTC

   Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows.  Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t

April 14, 2025

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U.S./China High Stakes Poker
Paying Article

April 14, 2025 7:30 AM UTC

The economic hit from a hard stop in U.S. imports/exports is too damaging for both sides and our baseline is still for a truce and de-escalation, in the coming weeks. This could be negotiations on a new trade deal with a more moderate reciprocal tariff on both sides and the extra reciprocal tariffs

April 10, 2025

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Trade Deals with the U.S.: Pressures and Obstacles
Paying Article

April 10, 2025 7:17 AM UTC

Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr

April 09, 2025

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U.S China Trade War: Deal or No Deal Prospects?
Paying Article

April 9, 2025 9:00 AM UTC

The prospect of a trade deal between the U.S. and China are less and likely delayed into 2026, due to the hardline stance of Trump 2.0 due to the extra focus on tariff tax revenue and shifting production back to the U.S. It is still our baseline that a deal will be agreed though we would now see a d

April 08, 2025

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Reciprocal Tariffs: The Hit To Other Countries
Paying Article

April 8, 2025 9:30 AM UTC

 Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings.  The impact will be adverse to GDP, but for some major countries could be less than the U.S.  How

April 07, 2025

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U.S. Equities: Hoping for Tariff Negotiations but Fearing Q2 Data
Paying Article

April 7, 2025 9:08 AM UTC

•    The U.S. equity market still remains under pressure from the announcement effect of large reciprocal tariffs, though hopes of trade deals could start to soon produce a stabilization of the market later this week.  Multi month the U.S. equity market outlook depends on whether a recession

April 03, 2025

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Tariffs: Inflation may be the biggest worry for the U.S.
Paying Article

April 3, 2025 4:12 PM UTC

While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt

April 02, 2025

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Taiwan: Grey Warfare or More?
Paying Article

April 2, 2025 7:05 AM UTC

   China grey warfare against Taiwan will continue, but we would only see a 5% probability of China invading Taiwan in 2025 and 2026.  The U.S. is pivoting towards Asia and China, while President Trump is not China friendly. A war with the U.S. over Taiwan would be very costly in military and eco

March 31, 2025

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U.S. Trade Surplus Countries: No Special Treatment?
Paying Article

March 31, 2025 9:04 AM UTC

Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals.  Trade policy uncertainty

March 27, 2025

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March Outlook: Navigating the Turbulence
Paying Article

March 27, 2025 10:30 AM UTC

All chapters of the March Outlook are now available and simply click the link below. 

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Car Tariffs Then Lenient Reciprocal Tariffs?
Freemium Article

March 27, 2025 8:59 AM UTC

   The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t

March 26, 2025

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Outlook Overview: Navigating the Turbulence
Paying Article

March 26, 2025 9:30 AM UTC

·       More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals.  This means some of t

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EMFX Outlook: Divergence versus the USD
Paying Article

March 26, 2025 9:16 AM UTC

EM currencies will be helped by the ongoing USD downtrend against DM currencies, but prospects also depend on relative inflation differentials versus the USD and starting point in terms of valuations.  The Brazilian Real (BRL), Mexican Peso (MXN) and Indonesian Rupiah (IDR) should all make modest s

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Equities Outlook: Turbulence Ahead
Paying Article

March 26, 2025 9:05 AM UTC

·       U.S. trade wars will likely hurt U.S. growth and raise inflation, with only small to modest Fed easing and a 10yr budget bill that will likely be neutral to negative for the economy.  With valuations still very high (Figure 1), we see scope for a correction to extend into mid-year th

March 24, 2025

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China Outlook: Construction and Trade Headwinds v Policy Stimulus
Freemium Article

March 24, 2025 9:00 AM UTC

   We look for 4.5% GDP growth in 2025.  Though residential property investment will subtract less from GDP growth, net exports will also be a drag on the economy in 2025 due to the trade war with the U.S.  Further fiscal stimulus beyond March’s NPC measures will be required to achieve a 5% GD

March 21, 2025

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Trump Product and Reciprocal Tariffs
Paying Article

March 21, 2025 9:00 AM UTC

It appears that we will get bad news from April 2 on extra tariffs before any good news.  Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment.  Secondly, part of the reason for tariffs is extra tax revenue and to try to s

March 17, 2025

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China: Mixed Early 2025 Data and Policy Stimulus
Paying Article

March 17, 2025 9:17 AM UTC

Headline industrial production and retail sales were better than expected, but the breakdown of the data shows a mixed picture for consumption and residential investment remains a negative drag on GDP before the 20% U.S. tariffs hits.  Meanwhile, though the weekend policy announcement on boosting d

March 11, 2025

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China: PBOC Slow Cuts with 5% Nominal GDP
Paying Article

March 11, 2025 8:45 AM UTC

•    The PBOC will likely cut slowly and gradually, as China seeks to avoid Yuan depreciation that could worsen the trade war with the U.S.  Additionally, MOF last week forecast nominal GDP of 5%, which with a real GDP target of 5% means that MOF is also forecasting zero inflation.  Close to

March 10, 2025

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Trump and Dollar Policies
Paying Article

March 10, 2025 6:04 AM UTC

   The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw

March 06, 2025

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China: Only Moderate Fiscal Stimulus
Freemium Article

March 6, 2025 7:55 AM UTC

China announced some fiscal stimulus to help meet the expected 5% GDP target for 2025.  Overall, we have not been surprised by the fiscal stimulus measures announced so far from the March NPC, that have been towards the lower end of expectations.  However, officials on Thursday have hinted that mo

March 04, 2025

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Asia Country Risk Ratings
Paying Article

March 4, 2025 11:00 AM UTC

We provide country risk reviews for Asia countries including China, India, Indonesia, Taiwan, Singapore and Thailand.  

March 03, 2025

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Trump Tariffs and U.S. Business and Consumer Sentiment
Paying Article

March 3, 2025 9:02 AM UTC

 •    Mexico and Canada are trying to frantically find solutions to delay across the board tariffs again, though the U.S. is hinting that the rate could be less than 25%.  China extra 10% tariff remains likely, as the U.S. increases trade pressure on China.  More tariffs also remain highly

February 28, 2025

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China: How Much U.S. Trade and Taiwan Pressure?
Paying Article

February 28, 2025 9:05 AM UTC

·       Trump eventually wants a trade deal with China and this could occur by the end of 2025, but the U.S. will ask for penalties if targets for U.S. imports to China are not met and this will lead to difficult negotiations. Reciprocal and product specific tariffs on China are also likely i

February 25, 2025

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China: More U.S. Tariffs, No Yuan Depreciation?
Paying Article

February 25, 2025 9:30 AM UTC

•    China is currently reluctant to see Yuan depreciation as it wants to get the U.S. to the negotiating table for a revised phase 1 trade deal and also over concerns about domestic capital outflows.  Cuts to the 7-day reverse repo rate are now likely to be in 10bps steps and we look for the

February 24, 2025

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Ukraine Peace, U.S. Troop Withdrawals and Trump NATO Threats
Paying Article

February 24, 2025 8:27 AM UTC

·       Our baseline remains of a Russia-friendly peace deal in Ukraine, but this need not lead to a weaker European security situation.  This is our baseline (Figure 1), but does require Europe to make concessions to the Trump administration on defence spending increases and trade. However,

February 19, 2025

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U.S. 25% Tariff for Cars, Pharma and Semiconductors?
Paying Article

February 19, 2025 1:40 PM UTC

·        Tariff reality in the spring and summer will likely be both tariff threats to negotiate trade deals and permanently higher tariffs in certain products and reciprocally to raise revenue for the U.S. government – along Peter Navarro guidance to Trump.  The macro effects of this cou

February 17, 2025

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Reciprocal Tariffs and Reducing Bilateral Trade Imbalances
Paying Article

February 17, 2025 10:28 AM UTC

·       President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.

February 14, 2025

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China: Private Sector Balance Sheet Recession?
Paying Article

February 14, 2025 10:45 AM UTC

  Overall, we maintain the view that parts of China’s household sector are showing signs of a balance sheet debt consolidation, due to the excess buildup of debt in the past 20 years relative to disposable income.  The non-financial corporate sector is more difficult to interpret, due to strengt

February 11, 2025

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Trump’s Tariffs: Steel Then Reciprocal and Then Cars
Paying Article

February 11, 2025 1:23 PM UTC

 The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems.  This could amplify the impact of

February 10, 2025

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Markets and Trump’s Early Days
Paying Article

February 10, 2025 7:55 AM UTC

  The early days of the new Trump administration has seen lots of volatility around the on-off tariffs with Canada and Mexico, but the more stable U.S. Treasury market has helped provide an anchor.  U.S. Treasuries have shift towards the view that the 10yr budget bill will be delayed until H2 and

February 06, 2025

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Fixing The U.S. Trade Deficit
Paying Article

February 6, 2025 2:30 PM UTC

  New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces.  While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued and as long as tariffs are

February 04, 2025

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China/U.S. Trade War and next To Talks?
Paying Article

February 4, 2025 10:02 AM UTC

China’s targeted and measured counter tariffs against the U.S. are designed to push the U.S. towards the negotiating table on the wider issue of the U.S./China trade deficit.  Negotiating will likely start into the spring, but negotiating will be tough as the U.S. wants a phase 2 deal with new ob

February 03, 2025

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Can Tech and Productivity Cushion China’s Long-Term Growth Slowdown?
Paying Article

February 3, 2025 3:45 PM UTC

 While innovation from China’s technology initiatives can provide help to cross over productivity, the benefit will likely only be modest due to the downgrading of the private sector in China and the lack of openness to inward trade.  The structural slowdown in capital productivity will dominate

January 23, 2025

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Trump and Markets
Paying Article

January 23, 2025 2:16 PM UTC

Global markets will be driven by policies and current valuation in 2025, especially new Trump administration policies.  Trump could jawbone markets for a lower value of the USD and lower oil prices, which could have a temporary modest impact (joint US/Japan FX intervention is possible) but the stru

January 22, 2025

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China/U.S. - Trade War or Trade Deal?
Paying Article

January 22, 2025 2:11 PM UTC

·       We see the April 1 review of the phase 1 U.S./China trade deal being adverse and President Trump’s carrot and stick approach leading to a 10% rise in tariffs on China imports by the summer.  We eventually see a phase 2 U.S./China trade deal being reached in Q4. The main alternative

January 20, 2025

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Brazil Risk Premia and EM Debt
Paying Article

January 20, 2025 8:15 AM UTC

Brazil debt market has two domestic crises rather than a spillover from the U.S. in the form of inflation and fiscal policy. Very restrictive BCB policy can help produce some disinflation and we forecast 4.1% for 2026, which some allow some rate cuts in H2. Brazil risk premium will likely be reduced