DM Country Research

View:

June 14, 2024

BoJ Review: Pushing Hikes to July, if any
Paying Article

June 14, 2024 5:24 AM UTC

BoJ keep rates and bond purchase the same, suggesting the planning for bond purchase cut will be decided in July

June 13, 2024

...
Norges Bank Preview (Jun 20): Continued Caution?
Paying Article

June 13, 2024 9:25 AM UTC

Given the thrust of recent data and the Board’s clear caution, the Norges Bank is very likely to leave the policy rate at 4.5% for a fourth successive meeting at its next Board meeting with the decision due on June 20.  It is also likely to retain the thinking first aired at the December meeting,

June 12, 2024

...
Fed: Door Still Open to 2024 Rate Cuts
Paying Article

June 12, 2024 7:43 PM UTC

Though the June SEP median Fed dot is for one 25bps cut in 2024, the details of the summary of economic projections and guidance from Fed chair Powell during the press conference make clear that one or two cuts are in current Fed thinking.  Data dependence is key for the Fed and we look for less GD

...
SNB Preview (Jun 20): Another Cut Likely but How Large an Inflation Target Undershoot
Paying Article

June 12, 2024 9:26 AM UTC

Along with market thinking, we see the SNB on June 20 repeating the 25 bp policy rate cut that it surprised many with three months ago.  This would take the policy rate to 1.25% and where the very clear below-target inflation picture in both recent actual numbers and the outlook flagged by the SNB

...
UK GDP Review: Flat April - How Resilient is the Economy?
Paying Article

June 12, 2024 6:31 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive, albeit with some continued volatility.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m

June 11, 2024

...
DM Fiscal Consolidation Problems: Politics/Central bank QT and Low Nominal GDP
Paying Article

June 11, 2024 2:10 PM UTC

 Some governments are politically reluctant to restrain government expenditure growth or in the U.S. case raise taxes.  This means that intermittent fiscal stress and concerns can be seen in the coming years.  However, to get to crisis levels would require a government that abandons any attempts

BoJ Preview: The Step of Faith
Paying Article

June 11, 2024 3:33 AM UTC

BoJ will likely decrease bond purchase from six trillion JPY to five trillion and hike interest rate by 0.1% as wage growth will bring trend inflation higher

June 10, 2024

...
European Parliament Election Results: A Swing to the Centre Right But Further Right in France
Paying Article

June 10, 2024 8:52 AM UTC

This week-end’s European Parliament elections produced the widely expected swing to the right, albeit more an electoral rebuff for incumbent ruling parties as voters registered their protests against current governments.   Hard-right parties largely did well but there were clear exceptions (Belg

June 07, 2024

...
China Excess Production: Exports Going Cheap?
Paying Article

June 7, 2024 8:45 AM UTC

China excess of production over domestic demand is causing disinflation pressures in China, but also leading to a fall in export prices as China companies seek buyers for production.  Though this is a helpful factor to the global inflation debate, it is causing trade tensions with the U.S. and EU o

June 06, 2024

...
ECB Review: Clearly No Policy Pre-Commitment But Policy Entering New Phase
Paying Article

June 6, 2024 2:11 PM UTC

As has been the case with many recent ECB verdicts, markets are keener to hear what is being said by the Council rather than what has been done.  In regard to the latter, and given the almost unanimous hints from Council members, all policy rates were cut by the expected 25 bp, with the key deposit

June 05, 2024

...
France Downgrade: Warning for the U.S./UK?
Paying Article

June 5, 2024 9:30 AM UTC

 French politics makes it difficult for President Macron to improve the underlying budget deficit and government debt after the S&P downgrade to AA-.  The National Rally could also do well in this week’s European parliamentary elections and put further pressure on Macron.  Meanwhile, though rat

June 04, 2024

...
European Parliament Election: A Swing to the Right?
Paying Article

June 4, 2024 9:09 AM UTC

This week-end (Jun 6-9 actually) sees fresh European Parliament elections, with it likely that that compared to the last (2019) result, there will be a clear swing to right-wing and/or populist parties.  However, polls do not suggest anything like enough of swing away from the current parliamentary

June 03, 2024

...
UK GDP Preview (Jun 12): Fresh Correction on the Cards?
Paying Article

June 3, 2024 1:52 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m in March accentuating the upgraded boun

May 31, 2024

...
H1 2025 Fiscal Stress or Crisis?
Paying Article

May 31, 2024 2:30 PM UTC

We see the U.S. facing fiscal stress in H1 2025.  Either a re-elected President Biden would be restrained by Republicans over raising the debt ceiling or a president Trump would want to make the lapsing parts of the 2017 tax cuts permanent.  Rating agencies would be unhappy with either scenario an

May 30, 2024

...
ECB Preview (June 6): D-Day
Paying Article

May 30, 2024 10:44 AM UTC

Given the almost unanimous hints from Council members, something unexpected is needed to prevent the ECB from starting to cut its policy rates on June 6, most notably the key deposit rate currently at an unprecedented 4.0%. The question markets are considering is how/when this widely expected 25 bp

May 29, 2024

...
U.S. Financial Stress: Select Issues Not Widespread
Paying Article

May 29, 2024 10:00 AM UTC

Higher U.S. interest rates are still feeding through with a lag, which can cause weaker corporates and households problems but point to divergence within consumption and investment rather than anything more serious. High leverage for hedge funds/issues for a small subset of banks and high holdings o

May 27, 2024

...
BoJ's Door Closing But Window Opens
Paying Article

May 27, 2024 5:23 AM UTC

Since the BoJ moved interest rate to 0% in March, most market participants expects further tightening as it is hard to believe the BoJ would hike once after all these years of ultra-loose monetary policy, in face of higher inflation. However, with headline inflation trading closer to 2%, it seems th

May 24, 2024

...
UK Sales Weakness Curbing Pricing Power?
Paying Article

May 24, 2024 7:05 AM UTC

Ending an interesting week of UK data, retail sales slumped in April, partly due to what was a wet month.  Notably, sales volumes fell by 2.3% m/m following a broadly flat February and March 2024 and were down by 2.7% y/y and 3.8% below their pre-pandemic level.  This weaker-than-expected outcome

May 23, 2024

...
Eurozone: PMIs Offer More Positive Gimmers – Still Too Good to be True?
Paying Article

May 23, 2024 9:19 AM UTC

The latest PMI data suggest the EZ economic recovery gained further momentum in May as the composite index rose to 52.3 in May from 51.7 in April, thereby implying positive private sector growth for the third consecutive month.  We remain wary about the messages from the data (see below and Figure

May 22, 2024

...
UK: July Election Called
Paying Article

May 22, 2024 4:27 PM UTC

In a somewhat surprise announcement, PM Sunak has called a general election for July 4, somewhat earlier than the autumn timetable that had been previously hinted at.  He is doing so with his Conservative Party lagging severely in the polls.  However, especially after recent local election results

...
UK CPI Inflation Review: Inflation Falls Further Amid More Signs of Price Persistence
Paying Article

May 22, 2024 6:57 AM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  But perhaps the CPI data is the most crucial with more signs of resilient services (and particularly in regard to eating out) very much questioning w

May 21, 2024

...
German Data Preview (May 29): Inflation to Rise Again Albeit Amid Soft Core Rate Trends?
Paying Article

May 21, 2024 2:08 PM UTC

As we have repeatedly underlined, base effects continue to distort the German HICP/CPI readings and the path down for inflation has not been smooth.  This will be even more clearly the case in the looming May numbers where a second successive and slightly larger rise in the headline rate is on the

The Aussie Chapter 4: Chinese Proxy
Paying Article

May 21, 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 Ch

May 20, 2024

...
ECB: June Rate Cuts Too Trigger More Rate Cut Expectations for 2024/25
Paying Article

May 20, 2024 10:50 AM UTC

However much the Council will resist fueling discussion of possible easing path, confirmation of a 1 cut normally increases speculation over further easing in subsequent quarters and we see 25bps in June followed by 25bps in September and December.  The market could discount some more easing over t

May 16, 2024

...
France and Japan: Debt Fuelled Growth Problem
Paying Article

May 16, 2024 10:30 AM UTC

Most of the surge in debt/GDP in Japan and 40% in France is due to higher government debt and this should not be a binding constraint provided that large scale QT is avoided – we see the ECB slowing QT in 2025 and are skeptical about BOJ QT in the next few years.  The adverse impact of higher deb

May 15, 2024

...
Eurozone: Consumers - Still Missing?
Paying Article

May 15, 2024 10:34 AM UTC

Revised national account data confirmed the upside surprise in the preliminary data with EZ GDP rising 0.3% q/q.  The question is whether this emergence from the modest H2 2023 recession is the start of more sustained momentum.  We think not, mainly due to what are still weak consumer fundamentals

May 14, 2024

...
UK Labor Market: Further Signs of Resilient Wage Pressure But Soggier Activity More Notable
Paying Article

May 14, 2024 8:40 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

May 13, 2024

...
UK CPI Inflation Preview (May 22): Inflation to Fall Further and More Broadly
Paying Article

May 13, 2024 12:10 PM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even existence if any start to an easing cycle.  But perhaps the CPI data is the most crucial making the looming April data all the more important for markets as they weigh the chances of an initial rat

May 10, 2024

...
Asset Allocation 2024: Tricky Seven Months Remaining
Paying Article

May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

May 09, 2024

...
BoE Review: Data Dependent Easing Bias Clearer?
Paying Article

May 9, 2024 12:52 PM UTC

There was little surprise that Bank Rate was kept at 5.25% for the sixth successive MPC meeting, nor that the dissent in favor of an immediate rate cut doubled to two as a result of Dep Gov Ramsden confirming more dovish leanings.  The updated projections at least validated the rate path discounted

May 08, 2024

...
China Equities: A Tactical Play
Paying Article

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

May 07, 2024

...
U.S. Fiscal Problems: 2025 More Than 2024
Paying Article

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

May 03, 2024

...
Norges Bank Review: Even More Caution?
Paying Article

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

May 02, 2024

...
BoE Preview (May 9): Easing Bias Clearer?
Paying Article

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

May 01, 2024

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

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

April 30, 2024

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

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.

April 29, 2024

...
UK Consumers: Rent the Growing Hit to Spending Power
Paying Article

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

...
German Data Review: Inflation Edges up Amid Less Resilient Services and Core Rate?
Paying Article

April 29, 2024 12:38 PM UTC

As we have repeatedly underlined, base effects continue to distort the German HICP/CPI readings, but the March data came in a notch below expectations for a third successive month.  Indeed, it fell from 2.7% to a 33-month low of 2.3% in the March HICP data, dominated by a clear fall in food inflati

April 26, 2024

...
Headwinds To Long-term Global Growth
Paying Article

April 26, 2024 9:30 AM UTC

Bottom line: While much focus is on the cyclical economic position to determine 2024 monetary policy prospects, the 2025-28 structural growth trajectory differs to the pre 2020 GDP trajectory for major economies.  While global fragmentation has a role to play, aging populations are already having a