Macro Strategy

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September 10, 2024

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Preview: Due September 11 - U.S. August CPI - Subdued, if marginally stronger than in the preceding three months
Paying Article

September 10, 2024 12:39 PM UTC

We expect August’s CPI to increase by 0.2% both overall and ex food and energy, with the respective gains before rounding being 0.18% and 0.21%. Such an ex food and energy rate would be slightly stronger before rounding  than in the preceding three months, though not strong enough to trouble the

September 09, 2024

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China Equities: More of the Same or Game changing Policies
Paying Article

September 9, 2024 9:15 AM UTC

 We remain strategically underweight China Equities in global and EM equity baskets, due to the structural slowing of growth and low EPS prospects. Event risk around the U.S. presidential election will also start to be considered.  Further targeted policies from China authorities could cause inter

September 06, 2024

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U.S. August Employment - A little stronger than downwardly revised June and July
Freemium Article

September 6, 2024 1:10 PM UTC

August’s non-farm payroll is a little weaker than expected with a 142k rise overall, 118k in the private sector, with significant negative back month revisions in the preceding two months totaling 86k. However the data is stronger than July’s, not only in the payroll, but also a correction lower

September 05, 2024

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Preview: Due September 6 - U.S. August Employment (Non-Farm Payrolls) - Less weak than a weather-restrained July
Paying Article

September 5, 2024 2:55 PM UTC

We expect August’s non-farm payroll to rise by 160k, 135k in the private sector, both slightly stronger than respective July gains of 114k and 97k that were probably restrained by weather but below 3-month averages of 170k and 146k, and thus implying a continued modest slowing in trend. We expect

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A Harder Landing and the Fed
Freemium Article

September 5, 2024 9:30 AM UTC

Though our baseline view is for a soft landing for the U.S. economy and the Fed cutting to 3.00-3.25% by end 2025 (here), uncertainty exists over the scale of the slowdown.  If the U.S. economy has a harder landing (stagnation/technical recession with 20-25% probability), then the Fed could likely

September 03, 2024

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Preview: Due September 11 - U.S. August CPI - Subdued, if marginally stronger than in the preceding three months
Paying Article

September 3, 2024 12:59 PM UTC

We expect August’s CPI to increase by 0.2% both overall and ex food and energy, with the respective gains before rounding being 0.18% and 0.21%. Such an ex food and energy rate would be slightly stronger before rounding  than in the preceding three months, though not strong enough to trouble the

September 02, 2024

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China Harder Landing Scenario
Paying Article

September 2, 2024 10:55 AM UTC

 We see a 30% probability of a harder landing in China GDP growth in 2025, which we most likely be in the 3-4% region but could persist into 2026 (Figure 1).  A large than projected slowdown in consumption would be a key concern, alongside persistently moderate negative deductions from residential

August 29, 2024

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Fed Faster Than ECB and BOE?
Paying Article

August 29, 2024 2:05 PM UTC

The Fed will likely ease by more than the ECB and BOE by June 2025, both given pro-activeness from the Fed and also the big gap between the current policy rate and Fed’s assessment of neutral rates.  We see a cumulative 175bps of cuts by end June 2025.  ECB hawks however are unlikely to stop a c

August 28, 2024

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China Consumer Volatility
Paying Article

August 28, 2024 1:30 PM UTC

China consumption patterns are divergent; slowing and becoming more volatile at a sub sector level.  Less certainty over new employment and wage growth, plus wealth worries over housing are some of the causes.  We forecast GDP to slow in H2 and be 4.0% in 2025.

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FOMC View Change: 75bps of Easing in 2024, 150bps in 2025
Paying Article

August 28, 2024 11:45 AM UTC

The dovish tone from Fed Chairman Jerome Powell’s Jackson Hole speech on Friday and the FOMC minutes from July 31 on Wednesday suggest the Fed is almost certain to start easing in September, though only if August’s non-farm payroll is surprisingly weak would 50bps become likely. We continue to e

August 27, 2024

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Preview: Due September 6 - U.S. August Employment (Non-Farm Payrolls) - Less weak than a weather-restrained July
Paying Article

August 27, 2024 3:58 PM UTC

We expect August’s non-farm payroll to rise by 160k, 135k in the private sector, both slightly stronger than respective July gains of 114k and 97k that were probably restrained by weather but below 3-month averages of 170k and 146k, and thus implying a continued modest slowing in trend. We expect

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Indonesia's Election Law Drama: Court Rulings and Political Fallout
Freemium Article

August 27, 2024 6:57 AM UTC

In a dramatic turn of events, Indonesia's parliament abandoned its plan to amend electoral laws. The parliament had recently planned to amend the country's electoral laws, aiming to overturn pivotal decisions by the Constitutional Court. The proposed changes, which have sparked widespread controvers

August 26, 2024

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Israel/Hezbollah War Risks
Paying Article

August 26, 2024 8:02 AM UTC

The probability of an Israel/Hezbollah war in the next 12 months has move up from low to modest probability, but would be a high impact event geopolitically and for global markets.  For global markets, a distinction would be drawn between an Israel/Hezbollah war that did not involve Iran/U.S. and o

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Hajj Surge and Trade Squeeze Drive Indonesia's Q2 Deficit Higher
Freemium Article

August 26, 2024 6:58 AM UTC

Indonesia's current account deficit widened to US$ 3.0bn in Q2 2024, driven by a higher services deficit from increased Hajj travel and a narrowing trade surplus. Strong portfolio investment inflows helped offset some pressures, but FDI inflows fell sharply. The H1 deficit reached US$ 5.4bn, up from

August 23, 2024

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Powell Jackson Hole Guidance
Paying Article

August 23, 2024 2:38 PM UTC

  Fed Powell clearly signaled a Sep 18 FOMC cut, but his analysis on the economy is softer than harder landing.  Though the option of 50bps was not ruled out, the comments from Powell and other Fed officials are more consistent with 25bps than 50bps.  Nevertheless, the Fed is now more focused on

August 21, 2024

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China Housing Bailout: More Needed
Freemium Article

August 21, 2024 9:00 AM UTC

Though China’s authorities have taken some action to help the residential construction sector, the negative drags from the huge excess completed housing and uncompleted projects continues to weigh directly on the construction/steel and cement sector and consumer confidence. Aggressive policy actio

August 20, 2024

Indonesia's 2025 Draft Budget: A High-Stakes Gamble on Growth and Subsidies
Freemium Article

August 20, 2024 6:24 AM UTC

Indonesia's 2025 budget is a high-risk gamble, with potential for the fiscal deficit to breach the 3% of GDP legal threshold. The ambitious revenue targets and planned spending cuts pose significant challenges, particularly in a low commodity price environment. The reliance on optimistic tax revenue

August 19, 2024

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Fed Decision Making/H1 2025 Fiscal Tensions and Yield Curve Steepening
Paying Article

August 19, 2024 8:15 AM UTC

2yr U.S. Treasury yields can fall gradually by end 2025 to 3.25%, as a more neutral Fed Funds era is discounted.  10yr yields ability to decline on a soft landing is more difficult, given high net supply facing the market.  We also remain concerned that the U.S. will see some temporary fiscal stre

August 15, 2024

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China Data: Soft Start to Q3
Freemium Article

August 15, 2024 6:40 AM UTC

Overall, the July data is consistent with our forecast of a weaker H2 and we still look for 4.7% GDP growth for 2024.  The data is also consistent with our forecast of 4.0% in 2025 GDP growth.  Consumption behavior could stall further and cause more of a drag than we anticipate and we now see a 30

August 14, 2024

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EM Markets Divergence with China Harder Landing Concerns
Paying Article

August 14, 2024 3:35 PM UTC

Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.  What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets

August 13, 2024

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Preview: Due August 14 - U.S. July CPI - Subdued, if stronger than in May and June
Paying Article

August 13, 2024 1:11 PM UTC

We expect July’s CPI to be acceptably subdued, but a little stronger than the preceding two months with gains of 0.2% both overall and ex food and energy. We expect the core rate to rise by 0.23% before rounding, up from 0.065% in June and 0.163% in May

August 12, 2024

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U.S. Election Update: Heading for the Least Risky Outcome?
Paying Article

August 12, 2024 3:06 PM UTC

Since President Joe Biden dropped out of the race, his Vice President Kamala Harris has moved into a marginal lead in the polls against former president Donald Trump and must now be seen, albeit marginally, as the more likely winner. Democrats are looking increasingly likely to gain control of the H

August 11, 2024

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Indonesia Q2 GDP Review: Resilient Economic Activity
Paying Article

August 11, 2024 4:48 PM UTC

Bottom line: Indonesia's Q2 GDP growth is expected to ease to 5% yr/yr. While government consumption is expected to have remained stable, moderation in Indonesia's external sector will hold growth back. Additionally, with no longer the boost from festive demand, private consumption is also expected

August 05, 2024

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U.S. July Employment looks below trend but unemployment is now trending higher
Paying Article

August 5, 2024 3:18 PM UTC

Sentiment on the US economy is seeing some wild swings. Eight days before a weaker than expected July non-farm payroll we saw a stronger than expected 2.8% annualized increase in Q2 GDP, the stronger than expected gain reflecting generally strong data in the month of June. If July turns out to be a

August 04, 2024

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Indonesia Q2 GDP Preview: Slight Easing After a Robust Start
Paying Article

August 4, 2024 8:00 PM UTC

Bottom line: Indonesia's Q2 GDP growth is expected to ease to 5% yr/yr. While government consumption is expected to have remained stable, moderation in Indonesia's external sector will hold growth back. Additionally, with no longer the boost from festive demand, private consumption is also expected

August 02, 2024

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U.S. July Employment - Consistent with below potential growth, but not recession
Paying Article

August 2, 2024 1:11 PM UTC

July’s non-farm payroll is weaker than expected with a 114k rise overall, 97k in the private sector, with weak details across the board, 29k in net negative revisions, a 0.2% rise in average hourly earnings, a lower workweek and a surprisingly sharp rise in unemployment, to 4.3% from 4.1%.  A 25b

August 01, 2024

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Preview: Due August 2 - U.S. July Employment (Non-Farm Payrolls) - Slightly slower, in part on weather
Paying Article

August 1, 2024 1:18 PM UTC

We expect July’s non-farm payroll to rise by 175k, 130k in the private sector, both slightly slower than in May and June but stronger than in April, suggesting only a moderate loss of momentum in the labor market. We expect an unchanged unemployment rate of 4.1% and a second straight 0.3% increase

July 30, 2024

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Preview: Due August 14 - U.S. July CPI - Subdued, if stronger than in May and June
Paying Article

July 30, 2024 1:08 PM UTC

We expect July’s CPI to be acceptably subdued, but a little stronger than the preceding two months with gains of 0.2% both overall and ex food and energy. We expect the core rate to rise by 0.23% before rounding, up from 0.065% in June and 0.163% in May

July 29, 2024

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U.S. Q2 GDP Momentum and Implications for Q3
Paying Article

July 29, 2024 4:07 PM UTC

The stronger than expected 2.8% annualized increase in Q2 GDP contained some positive signals going forward, particularly retail sales and the trade balance showing stronger data in June to suggest momentum entering Q3. However a large Q2 inventory build up is a negative. We now look for Q3 to incre

July 25, 2024

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US Q2 GDP exceeds expectations, business investment the main upside suprise
Paying Article

July 25, 2024 1:06 PM UTC

Q2 GDP has come in significantly stronger than expected with a 2.8% increase while core PCE prices are also above consensus at 2.9%, which suggests despite yesterday’s call from former New York Fed President Dudley, a July Fed easing remains very unlikely. 

July 24, 2024

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Preview: Due July 25 - U.S. Q2 GDP - A second straight subdued quarter, with slower Core PCE Prices
Paying Article

July 24, 2024 5:27 PM UTC

We look for a 1.8% annualized increase in Q2 GDP, slightly stronger than the 1.4% seen in Q1 but still leaving a significant slowing from the strong second half of 2023. The first two quarters of 2024 are set to be the weakest since the first two quarters of 2022 recorded modest declines.

July 23, 2024

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China: The Squeezed Middle and Bottom 50%
Paying Article

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.

July 22, 2024

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Preview: Due August 2 - U.S. July Employment (Non-Farm Payrolls) - Slightly slower, in part on weather
Paying Article

July 22, 2024 2:24 PM UTC

We expect July’s non-farm payroll to rise by 175k, 130k in the private sector, both slightly slower than in May and June but stronger than in April, suggesting only a moderate loss of momentum in the labor market. We expect an unchanged unemployment rate of 4.1% and a second straight 0.3% increase

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Biden Drops Out, But Yield Curve Still to Steepen
Paying Article

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

July 18, 2024

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Preview: Due July 25 - U.S. Q2 GDP - A second straight subdued quarter, with slower Core PCE Prices
Paying Article

July 18, 2024 3:30 PM UTC

We look for a 1.8% annualized increase in Q2 GDP, slightly stronger than the 1.4% seen in Q1 but still leaving a significant slowing from the strong second half of 2023. The first two quarters of 2024 are set to be the weakest since the first two quarters of 2022 recorded modest declines.

July 17, 2024

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U.S. Household Wealth: Bottom 50% Need Income
Paying Article

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

July 15, 2024

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China: Retail Sales Drags Q2 GDP
Paying Article

July 15, 2024 7:33 AM UTC

We are revising down our 2024 GDP forecast from 4.9% to 4.7%, both due to the weaker than expected Q2 GDP figure but also the weak underlying momentum of consumption.  Some further targeted policy measures are likely in the coming months, but will struggle to lift economic momentum.

July 12, 2024

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EZ and UK Government Bonds: Decoupling From the U.S.?
Paying Article

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

July 11, 2024

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U.S. Republican National Convention Approaching
Paying Article

July 11, 2024 4:51 PM UTC

US political focus may currently be on whether President Joe Biden will remain in the contest for president, though the Republican National Convention which runs from August 15 through August 18 is rapidly approaching. This will give useful insight on what a second term for former president Donald T

July 10, 2024

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Preview: Due July 11 - U.S. June CPI - Another subdued month, similar to May
Paying Article

July 10, 2024 12:07 PM UTC

We expect June’s CPI to look similar to May’s, with an unchanged outcome overall and a 0.2% increase ex food and energy. Before rounding we expect gains of 0.04% overall and 0.19% ex food and energy, up from 0.01% and 0.15% respectively in May, but both May and June would still be softer than an

July 09, 2024

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Israel and Hezbollah: Tensions or War?
Paying Article

July 9, 2024 2:28 PM UTC

Tensions are growing between Israel and Hezbollah, though the odds of a war in the next 6 months remain modest.  Military strategists note that such a war would require a large scale ground offensive and this is difficult given the war in Gaza.  

July 05, 2024

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U.S. June Employment - Consistent with an economy growing below potential
Paying Article

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