Eurozone: PMI Slump Shows Energy Surge Constraining Activity, Not Just Hitting Costs

May 21, 2026 8:36 AM UTC

Once again surprising on the downside flash Eurozone Composite PMI fell to 47.5 in May from 48.8 in April and below the 50.0 no-change mark for the second successive month. The latest reading thereby signalled a further and steeper m/m reduction in business activity, was the sharpest since October 2

FOMC Minutes from April 29: Hawkish concerns appear broadly felt

May 20, 2026 6:54 PM UTC

FOMC minutes from April 29 show a hawkish leaning, confirming market perceptions that there was more interest in removing an easing bias from the language than revealed by the three hawkish dissents at the meeting. Should inflation remain persistent, tightening could come onto the agenda, though sho

ECB: Not the Only Game in Town – But A Time for Hair Shirts?

May 19, 2026 11:22 AM UTC

When hearing ECB Council policy thinking one can get the impression that it sees only a direct link from changes in its policy rate to inflation rather than the latter succumbing to a range of factors, this being the transmission mechanism.  Most important of course is the economic damage that chan

Middle East Conflict: U.S. Helping Chinese Whispers?

May 15, 2026 11:26 AM UTC

 In hosting President Trump this week, China feels it is vying, if not achieving, parity with the U.S. as the world’s superpowers; from China’s perspective, it regards Russia similarly.  It does seem as if China’s goal at this summit was to get more effective flexibility in shaping Taiwan’

Preview: Due May 28 - U.S. April Personal Income and Spending - PCE Prices to underperform CPI

May 14, 2026 3:26 PM UTC

We expect April’s core PCE price index to rise by 0.3%, with overall PCE prices up by 0.5%, both slightly below respective CPI outcomes of 0.4% and 0.6%. We expect a 0.3% rise in personal income to underperform a 0.5% rise in spending, but due to lower taxes disposable personal income may outperfo

U.S. April Retail Sales - Ex auto and gasoline still showing underlying resilience

May 14, 2026 1:01 PM UTC

April retail sales with a rise of 0.5% overall, 0.7% ex autos and 0.5% ex autos and gasoline are in line with expectations, and while likely to be marginally negative overall in real terms the ex autos and gasoline data suggests continued consumer resilience. Initial and continued claims have both p

U.S. April CPI - Subdued ex food, energy and what looks like one-time strength in shelter

May 12, 2026 1:08 PM UTC

April CPI is only marginally stronger than expected on the core rate, up by 0.4%, 0.376% before rounding, and the data not alarming outside of a one-time distortion in housing. The headline gain of 0.6% was as expected, and here the rise was a little firmer at 0.64% before rounding.

U.S. April Employment - Resilience should keep easing off the near term agenda

May 8, 2026 1:04 PM UTC

April’s non-farm payroll suggests the US economy continues to grow at a respectable pace in early Q2 with no signs of a hit from the oil shock yet. Payrolls increased by a stronger than expected 115k, with unemployment stable at 4.3% and the workweek stronger at 34.3 hours from 34.2. Average hourl

Eurozone: In Dire Straits?

May 8, 2026 10:55 AM UTC

Amid all the concern about the energy-induced surge in inflation resulting from the Middle East conflict, the impact on EZ real economy looks to be sizeable and growing.  High profile PMI numbers are flashing alarmingly, but the message from the April composite (at a 17-mth low) may actually be not

Straits of Hormuz Scenarios

May 7, 2026 6:25 AM UTC

·       Our new baseline (70% probability) is for the Straits of Hormuz to start to partially reopen by June/July based on a framework deal between Iran and the U.S.  This means more elevated oil prices in Q2, but then a gradual reduction in WTI to USD85 end-2026 and USD75 end 2027.  The al

U.S. April ISM Services, March Job Openings, New Home Sales - Economy growing moderately

May 5, 2026 2:25 PM UTC

The latest round of data provides no major net surprises, with a modest decline in job openings, two straight moderate increases in new home sales and a modest slowing in the ISM services index. The data is consistent with an economy still showing moderate growth.

U.S. Labour: In Praise of Older Workers

May 5, 2026 8:32 AM UTC

·       While financial pressures are prompting U.S. workers to delay retirement and work longer, this is not being realized due to deteriorating health/labour market skills mismatches and other issues. More work from older workers is unlikely to be the solution to shrinking net immigration.

RBA Review: Last Hike for Now?

May 5, 2026 5:14 AM UTC

The RBA March meeting hike rates to 4.35% on a 8-1 vote
Forward guidance seems to signal last hike for now

ECB Review: ECB Mixed Communications

April 30, 2026 2:01 PM UTC

·       Overall, the June and July meetings have live risks that the ECB could undertake a modest 25bps hike.  If a partial reopening of the Straits of Hormuz occurs then the ECB will likely keep hawkish, but not actually hike.  We feel that the ECB is overestimating natural gas prices, whi

Eurozone GDP & HICP Review: Fragile Resilience?

April 30, 2026 9:30 AM UTC

We continue to be critical of the ECB assertion (at least before the Iran War) that the EZ economy was in a ‘good place’.  This to us was too backward looking and amid some signs in both hard, soft and monetary data, that the economy going into the last quarter was soft and fragile.  Indeed, f

FOMC - Easing call moved to December from September

April 29, 2026 7:58 PM UTC

The Fed is now entering a transition from Chairman Powell to Chairman Warsh, who looks set to be in place at the next meeting on June 17. The final meeting of Powell’s term saw three hawkish dissents on the language and Powell announce he will continue as Governor after his term as Chair ends. We

FOMC keeps rates on hold but three of four dissents are hawkish

April 29, 2026 6:23 PM UTC

The main surprise in the FOMC statement was the number of dissents, one dovish, Miran continuing to call for a 25bps easing, and three hawkish, with Hammack, Kashkari and Logan in agreement with the decision to leave rates unchanged but objecting to the inclusion of an easing bias.

Preview: Due April 30 - U.S. March Personal Income and Spending - Core PCE Prices to outperform core CPI

April 29, 2026 1:26 PM UTC

March’s personal income and spending data may be overshadowed by the Q1 GDP report due at the same  time and to which it will contribute.  We expect a 0.9% rise in personal spending, to exceed both a 0.2% rise in personal income and a 0.7% rise in PCE prices. For core PCE prices, we expect an in

Big EM: Diverging Fiscal Trends

April 28, 2026 12:35 PM UTC

·       EM government bond spreads are controlled as 2nd round inflation effects are likely to be less than 2022, due to less buoyant domestic demand/slacker labour markets and less global supply chain pressure ex oil/oil products.  Brazil is expected to cut rates and others will likely not

Eurozone: Even Tighter Corporate Credit Standards Continues and More Loans Applications Rejected

April 28, 2026 8:51 AM UTC

Given the ever clearer fall-out from the conflict in the Gulf, it was hardly a surprise of even tighter credit standards (Figure 1), thereby merely accentuating trends in the four previous Bank Lending Surveys (BLS).  At least as far as firms and especially consumers seeking credit are concerned, t

BoJ Review: Hawkish Hold

April 28, 2026 4:53 AM UTC

The BoJ kept rates unchanged at 0.75% in the April meeting with a 6-3 vote

Straits of Hormuz Standoff and Mixed Markets

April 27, 2026 9:02 AM UTC

•    Equities longer time horizon means that they are hoping for a reopening of the Straits of Hormuz (though also being helped by renewed AI optimism), whereas government bond markets actually want to see tangible progress and an associated tempering of DM central banks posturing.  This dive

ECB Preview (Apr 30): Real Economy Buckling Already!

April 23, 2026 12:21 PM UTC

We again expect no change from the ECB on Apr 30, but President Lagarde will probably have to admit in the Q&A that unlike last time the decision was not unanimous.  Overall, the communication will again suggest upside risks for inflation and downside risks for economic growth the extent and durati

FOMC Preview for April 29: Uncertainty keeping the Fed on hold

April 22, 2026 2:29 PM UTC

The FOMC meets on April 29 and there is little risk of a change in rates from the current target range of 3.5-3.75%. High uncertainty, both on the geopolitical situation and the future of the Fed, suggests there will be little forward guidance, and the dots will not be updated until the next meeting

Iran Conflict – Who Has the ‘Trump’ Card

April 22, 2026 9:17 AM UTC

When Trump aspires to reaching a deal, he thinks in either black or white.  But whether it be political, economic or military the reality is that the world is always various shades of grey.  This is very much evident in the way the Iran conflict was planned by the U.S. – the expected clear and r

Preview: Due April 30 - U.S. March Personal Income and Spending - Core PCE Prices to outperform core CPI

April 21, 2026 2:38 PM UTC

March’s personal income and spending data may be overshadowed by the Q1 GDP report due at the same  time and to which it will contribute.  We expect a 0.9% rise in personal spending, to exceed both a 0.2% rise in personal income and a 0.7% rise in PCE prices. For core PCE prices, we expect an in

U.S. March Retail Sales - Underlying resilience, lower taxes may be helping

April 21, 2026 1:02 PM UTC

March retail sales with a 1.7% rise, 1.9% ex autos are stronger than expected. Most of the rise is on the surging price of gasoline, though sales ex auto and gasoline with a 0.6% increase are on the firm side of expectations, with February revised up to 0.6% from 0.4% and January to 0.4% from 0.2%.

EZ HICP Preview (Apr 30): Headline Surges Again as Core Stabilises?

April 21, 2026 9:29 AM UTC

The first of the Iran War induced rise in prices arrived with the final March HICP data in line with expectations, as the headline rate spiked higher to 2.6% from February’s 1.9%, but with the core rate falling back (Figure 1) underscoring that this March surge was purely energy-led.  Indeed, thi

Eurozone Flash GDP Preview (Apr 30): Softer Even Before Iran Conflict?

April 20, 2026 1:20 PM UTC

We have been critical of the ECB assertion (at least before the Iran War) that the EZ economy was in a ‘good place’.  This to us was too backward looking and amid some signs in both hard, soft and monetary data, that the economy going into the last quarter was slowing.  Indeed, part of a broad

Equities: Still a Rocky Road in 2026

April 17, 2026 12:49 PM UTC

·       Any deal between the U.S. and Iran would still be seen as a positive win in equities, as it would raise hopes that it could be followed by a multi-year settlement that could include more Iran oil and gas into the global energy markets and lower energy prices. No deal is also feasible,

Eurozone; ECB Tone More Neutral Than Suggested by March Meeting Market Reaction?

April 16, 2026 12:18 PM UTC

Little new can be taken from the minutes to the March ECB Council 19 meeting, save that at least to us the ECB was too optimistic about growth and too pessimistic about inflation. In regard to the latter, while acknowledging tighter financial conditions, the ECB still seemed to be downplaying what a

China: GDP Beat, But Domestic Demand Weak

April 16, 2026 6:39 AM UTC

•    Q1 GDP beat expectations helped by Industrial production, but the domestic demand picture remains weak with soft consumption and the ongoing negative drag from the residential property sector. We still feel that the economy remains too dependent on high tech manufacturing and modest consu

DM Central Bank Signals Awaited

April 15, 2026 12:12 PM UTC

·       Fed/ECB and BOE meetings will likely see concern over the potential 2nd round inflation effects from the Iran war, but forecasts seeing inflation coming down in 2027 and no imminent signals of tightening from the ECB/BOE – our baseline remains for easing later in the year, as energy

Eurozone: ECB Downplaying Supply of Credit as it Focuses on its Cost

April 14, 2026 1:35 PM UTC

Even amid increasing suggestions that the Middle East conflict will reap marked real economy damage that should limit the length and extent of any inflation surge, markets are still pricing in almost three 25 bp ECB hikes in the coming year.  We think this is still very excessive and reflects an ou

Iran Blockade and What Next?

April 13, 2026 9:58 AM UTC

·       Though the U.S. is introducing a blockade on Iran oil exports, we think the U.S. and Iran remain reluctant to restart the war.  How Iran responds to the U.S. blockade is important.  It could choose to respond by attacking Gulf energy installations before or after the 2-week ceasefir

U.S. March CPI - Subdued core rate provides relief

April 10, 2026 12:55 PM UTC

March CPI is as the market expected with a 0.9% increase (0.865% before rounding) led by a surge in energy, but the core rate ex food and energy shows little sign of feed through, rising by a lower than expected 0.2%, with the gain before rounding at 0.196%, the slowest since November’s subdued tw

China: Oil boosts PPI but CPI Less

April 10, 2026 7:37 AM UTC

•    Given lags and the still elevated oil prices for Q2/Q3 delivery it is likely that PPI will be further boosted in the coming months. This could boost 2026 China CPI by around 0.3-0.4% and we changed our 2026 forecast to 1.4% in the March Outlook (here) -- the higher price of Fertilizers wi

U.S. Personal Income slips, Core PCE Prices remain firm

April 9, 2026 1:17 PM UTC

The latest US data is mostly on the weak side of expectations, most notably a 0.1% decline in personal income for February that significantly underperformed a 0.5% rise in spending (itself slightly below expectations) which saw the savings rate slip back after a tax cut-assisted bounce in January. 0

FOMC Minutes from March 18: Increased risks, but still a dovish leaning

April 8, 2026 6:58 PM UTC

FOMC minutes from March 18 show greater concern over inflationary risks but with concerns also seen on risks to employment, do not appear to be hawkish. It still appears that the next move is more likely to be an ease than a hike, even if the timing for rate cuts may have been pushed back somewhat.

Preview: Due April 9 - U.S. January Personal Income and Spending - Core PCE Prices to outperform CPI

April 8, 2026 12:13 PM UTC

We expect February to see a third straight strong 0.4% increase in core PCE prices, while personal spending with a 0.6% increase outperforms a 0.3% rise in personal income. This will see a January bounce in savings corrected.

Eurozone: Manufacturing Seeing Excess Supply Not Excess Demand

April 8, 2026 11:13 AM UTC

In Europe generally, but especially in the EZ, it will be manufacturing that will bear the brunt of the recent jump in energy prices, where industrial electricity prices even before the conflict started were among the highest globally. While high energy costs affect all sectors, manufacturing’s re

2-Week Ceasefire, Then?

April 8, 2026 10:09 AM UTC

·       The ceasefire will likely involve a new normal of shipping companies paying Iran a toll.  While this is adding a cost to Gulf crude oil/products and LNG, the premium will be a lot lower than the cost of an ongoing war.  The U.S. and Iran will now likely be reluctant to restart the w

2yr and The Iran War

April 7, 2026 8:00 AM UTC

·       2yr yields can edge lower from current less elevated levels, as DM central banks continue to try to calm fears of near-term rate hikes outside of the BOJ/RBA.  However, the key swing factor remains the length of the Iran war, as that will determine the trajectory of energy prices in

U.S. March ISM Services - Slower but far from weak, with inflationary pressure rising

April 6, 2026 2:15 PM UTC

March’s ISM services index of 54.0 is weaker than expected and down from February’s 56.1 which was the strongest since July 2022. However, March’s reading remains higher than in every month of 2025, contrasting the S and P services PMI, which on Friday was revised down to a below neutral 49.8

U.S. March Employment - Strong report suggests risks clearly higher on the inflation side

April 3, 2026 1:27 PM UTC

March’s non-farm payrolls is clearly on the strong side of expectations, up by 178k and an even stronger 186k in the private sector, with minimal net downward revisions of 7k. Unemployment unexpectedly fell to 4.3% from 4.4%. Less positive are a lower than expected 0.2% rise in average hourly earn

Preview: Due April 9 - U.S. January Personal Income and Spending - Core PCE Prices to outperform CPI

April 1, 2026 2:44 PM UTC

We expect February to see a third straight strong 0.4% increase in core PCE prices, while personal spending with a 0.6% increase outperforms a 0.3% rise in personal income. This will see a January bounce in savings corrected.

U.S. February Retail Sales and March ADP Employment resilient, but gasoline prices may undermine consumers

April 1, 2026 1:10 PM UTC

March’s ADP’s estimate of private sector employment of 62k is stronger than the market expected and similar to February’s 66k. February retail sales are also marginally firmer than expected, up by 0.6% overall, 0.5% ex autos and 0l;4% ex autos and gasoline.  In March consumers will be dealing

Eurozone Labor Market: A Structural and Disinflationary Shift?

April 1, 2026 10:00 AM UTC

That we think the ECB is being optimistic about the real economy and labor market outlook is almost an understatement made all the more so since the outbreak of the Iran War.  In the ECB’s latest baseline scenario, recession is clearly avoided and the jobless rate, while revised a little higher (

Iran War: Invasion Risks

March 31, 2026 10:55 AM UTC

·       Any ground-based invasion would likely result in a long war and Iran would likely counter with attacks on energy or other key facilities around the Gulf.  Sea and air based invasions are also difficult, while any victory would likely be followed by occupation.  WTI oil prices would