Preview: Due December 6 - U.S. November Employment (Non-Farm Payrolls) - Rebound from October's hurricanes and strike

November 26, 2024 3:36 PM UTC

We expect an above trend 260k increase in November’s non-farm payroll, with 225k in the private sector. This will follow weak October outcomes of up 12k overall and down 28k in the private sector, depressed by two hurricanes and a strike at Boeing. We however expect unemployment to be unchanged at

Trump Deregulation and U.S. Financial Stability

November 26, 2024 10:05 AM UTC

Regional banks will be the main beneficiaries from a further watering down or postponement (that is likely under the Trump administration) of the proposed capital increase under the Basel endgame.  Combined with laxer M&A rules for bank takeover, this could help lending and credit growth for the U.

Trump International: EM Countries

November 22, 2024 9:08 AM UTC

Trade and geopolitics will be the key drivers for the Trump administration relationship with key EM countries.  While uncertainty on policy tactics are high, China and Vietnam will be among the first to see trade threats and actual tariffs.  Mexico will see threats over the 2026 USMCA review and i

Trump International: DM Countries

November 21, 2024 7:06 AM UTC

Much uncertainty still exists on policy but in 2025 the EU will likely be under pressure from targeted new tariffs by the Trump administration, while also being asked to spend more on defense spending.  Purchasing extra LNG and military hardware from the U.S. is one way towards a potential trade de

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

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

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

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

U.S. October CPI - A more balanced report

November 13, 2024 2:13 PM UTC

October CPI has seen the fourth straight rise of 0.2% overall and the third straight rise ex food and energy of 0.3%, both on consensus. Before rounding the gains were 0.24% and 0.28% respectively, the latter slower than September’s 0.31% but in line with August’s. The data leaves the December F

Preview: Due November 13 - U.S. October CPI - Similar to August and September

November 12, 2024 1:38 PM UTC

We expect October’s CPI to increase by 0.3% overall for a fourth straight month with a third straight 0.3% increase ex food and energy. Before rounding we expect a 0.20% rise overall, slightly stronger than the three preceding outcomes, with a 0.28% rise ex food and energy. The latter will be soft

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

Imports Surge, Growth Slows: Indonesia’s Q3 GDP Falls Short of 5% Mark

November 11, 2024 6:43 AM UTC

Bottom line: Indonesia’s Q3 GDP growth slipped to 4.95% yr/yr in Q3, missing the 5% target as soaring imports weighed on the headline figure. Private consumption remained steady, while fixed investment showed resilience with notable gains. Looking ahead, Q4 may bring further softening. 

FOMC Eases by 25bps. We Now Expect 100bps More by Mid-2025 Before Renewed Tightening in 2026

November 7, 2024 8:38 PM UTC

The FOMC eased rates by 25bps as expected with a statement that avoided making any further dovish signals beyond what were given on September 18. In his press conference Chairman Jerome Powell left his options open for December when the decision will be data-dependent. On balance we still lean towar

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.

Preview: Due November 13 - U.S. October CPI - Similar to August and September

November 4, 2024 2:26 PM UTC

We expect October’s CPI to increase by 0.3% overall for a fourth straight month with a third straight 0.3% increase ex food and energy. Before rounding we expect a 0.20% rise overall, slightly stronger than the three preceding outcomes, with a 0.28% rise ex food and energy. The latter will be soft

Will China Deflation Depress GDP?

November 4, 2024 7:05 AM UTC

China most likely faces aggressive disinflation rather than Japan style deflation that depress GDP. China is a middle income country with incomplete urbanization/consumption, while China authorities appear more proactive than Japan in the 1990’s.  However, support for households remains light, wh

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.

Preview: Due November 1 - U.S. October Employment (Non-Farm Payrolls) - Hurricanes and strike to deliver below trend month

October 31, 2024 2:24 PM UTC

We expect a below trend 75k non-farm payroll increase in October, with only 40k in the private sector. This would follow above trend gains of 254k and 223k respectively in September, depressed by a strike at Boeing and Hurricanes Helene and Milton. While payrolls will be below trend, we expect unemp

U.S. Q3 GDP Sustains Momentum, Core PCE Prices Still Above Target

October 30, 2024 1:07 PM UTC

The 2.8% increase in Q3 GDP is in line with expectations and another solid quarter to follow a 3.0% rise in Q2. The gain was led by a 3.7% rise in consumer spending but domestic demand looks healthy outside slippage in private sector construction. A slightly stronger than expected 2.2% rise in the c

Preview: Due October 30 - U.S. Q3 GDP - Slower but still solid with Core PCE Prices consistent with target

October 29, 2024 1:17 PM UTC

We expect a 2.4% annualized increase in Q3 GDP, slower than Q2’s 3.0% but still maintaining solid momentum. with a slowing in core PCE prices to an on-target 2.0% annualized after gains of 2.8% in Q2 and 3.7% in Q1.

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

Preview: Due November 1 - U.S. October Employment (Non-Farm Payrolls) - Hurricanes and strike to deliver below trend month

October 21, 2024 2:35 PM UTC

We expect a below trend 75k non-farm payroll increase in October, with only 40k in the private sector. This would follow above trend gains of 254k and 223k respectively in September, depressed by a strike at Boeing and Hurricanes Helene and Milton. While payrolls will be below trend, we expect unemp

Preview: Due October 30 - U.S. Q3 GDP - Slower but still solid with Core PCE Prices consistent with target

October 18, 2024 4:20 PM UTC

We expect a 2.4% annualized increase in Q3 GDP, slower than Q2’s 3.0% but still maintaining solid momentum.  Q3’s gain will be led by consumer spending, with a slowing in core PCE prices to an on-target 2.0% annualized after gains of 2.8% in Q2 and 3.7% in Q1.

China September Data Rotates Higher, But

October 18, 2024 7:30 AM UTC

Q3 GDP and September monthly figures were slightly better than expected. Combined with a speed up of local government spending in Q4 and more completion of uncompleted homes, we change our 2024 GDP forecast to 4.8% v 4.6%.  However, despite a further Yuan1.5-2.0trn of fiscal stimulus to come, we st

U.S. Tensions for China: Protected by BRICS and BRI?

October 15, 2024 9:30 AM UTC

BRICS can provide a political buffer but not economic, as BRICS are still searching for practical areas for cooperation.  However, Donald Trump universal tariffs threats could focus BRICS on more intra EM trade. BRI has already helped to redirect China exports to EM countries, despite the slowdown

China Fiscal Stimulus: Details to Follow

October 14, 2024 8:37 AM UTC

Further details of the size of extra central government spending/scaled up local authority purchases of unsold complete homes for affordable housing should be seen late October/early November from the National People Congress.  We estimate Yuan1.5-2.0trn in total of extra spending, which leads us t

China and Japan Debt Compared

October 10, 2024 1:35 PM UTC

China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption.  Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a stru

U.S. September CPI - Core not led by housing this time, Hurricanes starting to lift Initial Claims

October 10, 2024 1:19 PM UTC

September CPI is on the high side of expectations, up 0.2% overall and 0.3% ex food and energy, with the gains before rounding being 0.18% and 0.31% respectively. While the core rate looks similar to August’s, the details are different with strength not led by housing this time. A spike in initial

Preview: Due October 10 - U.S. September CPI - Core returning to trend, gasoline softer

October 9, 2024 12:26 PM UTC

We expect September’s CPI to increase by 0.1% overall with a 0.2% increase ex food and energy. We expect the core CPI to be very close to 0.2% even before rounding, but with a significant decline in gasoline prices expected, we expect the headline CPI to rise by only 0.06% before rounding.

U.S. September Employment - A strong month and downside risk to October has fallen too

October 4, 2024 1:13 PM UTC

September’s non-farm payroll is well above consensus with a rise of 254k. Unusually net back revisions are positive at 72k, if largely in government. Unemployment unexpectedly fell to 4.1% from 4.2% and average hourly earnings were above trend at 0.4% again with upward back revisions. This is clea

China: Any Lessons from the 1997-98 Asian Crisis?

October 3, 2024 1:30 PM UTC

Overall, the warning from slow real credit growth on reduced credit supply and demand is the main lesson from the Asia crisis 1997-98.  China High FX reserves; low borrowing overseas and dominance of domestic investors in Yuan markets argues against a currency crisis.  Asia widespread banking cris

Preview: Due October 4 - U.S. September Employment (Non-Farm Payrolls) - Initial claims suggest a stronger month

October 3, 2024 1:10 PM UTC

Lower initial claims suggest September’s nonfarm payroll will be a little stronger than the three preceding releases, which averaged 116k. We expect a 180k increase, with 150k in the private sector. We expect unemployment to be unchanged at 4.2% and an in line with trend 0.3% increase in average h

Markets: Rate Cuts or Geopolitics?

October 2, 2024 9:36 AM UTC

Israel will likely counteract Iran, which will prompt a further missile attack by Iran.  However, our bias remains that Israel main aim is to have a buffer zone in southern Lebanon up to the Latani river and not fight a prolonged war with Iran.  This limits the economic fallout globally and on oil

Preview: Due October 10 - U.S. September CPI - Core returning to trend, gasoline softer

October 1, 2024 12:02 PM UTC

We expect September’s CPI to increase by 0.1% overall with a 0.2% increase ex food and energy. We expect the core CPI to be very close to 0.2% even before rounding, but with a significant decline in gasoline prices expected, we expect the headline CPI to rise by only 0.06% before rounding.

Powell suggests FOMC not in a hurry to get rates to neutral

September 30, 2024 7:07 PM UTC

The latest speech given by Fed Chairman Jerome Powell to the NABE was not seen as dovish, suggesting the labor market is roughly where the Fed wants and easing is designed to keep it that way. In the Q+A he went on to see GDP revisions as having reduced downside risk, and suggested the Fed is not in

Israel/Hezbollah Scenarios

September 30, 2024 9:26 AM UTC

The most likely scenarios between Israel and Hezbollah are Israel/Hezbollah intermittent attacks/counterattacks (40%) or significant ground invasion Southern Lebanon (45%).  Both would be difficult in human terms and raise geopolitical tensions, but are unlikely to cause a lasting impact on global

U.S. GDP: Historical revisions mostly positive and significantly so for income

September 26, 2024 3:28 PM UTC

While Final Q2 GDP was unrevised at a strong 3.0% pace and the core PCE price index was also unrevised at 2.8%, Gross Domestic Income saw a strong upward revision to 3.4% from 1.3%. More significantly, the release included historical revisions for the past five years, and these were generally positi

EM FX Outlook: Fed Easing Helps but Divergent Trends

September 26, 2024 8:00 AM UTC

  USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.  However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY).  Where inflation differentials are modest against the U.S., but

Charting Our Views: Technical Analysis for Q4 2024

September 25, 2024 1:35 PM UTC

Our latest quarterly technical analysis views on Bonds, Equities, Commodities and FX is now available.  

Asia/Pacific (ex-China/Japan) Outlook: Shifting Gears for Growth

September 25, 2024 7:57 AM UTC

Emerging Asian economies are poised to remain the fastest growing globally. India and Southeast Asia will drive regional resilience amid China’s cooling growth engine in 2025. For India, while the external environment remains challenging due to weaker global demand and geopolitical tensions, domes

Outlook Overview: Rate Cuts But How Far?

September 25, 2024 7:30 AM UTC

·        The U.S. economy is slowing, with the critical question being whether this is a soft or harder landing.  Our broad analysis leaves us inclined to the soft landing view into 2025, though we shall watch real sector data closely over the next 3-6 months to check the trajectory.  Else

DM FX Outlook: USD Set for 2025 Decline

September 25, 2024 7:11 AM UTC

·       Bottom Line: The USD has reached the end of year targets of 1.12 for EUR/USD and 140 for USD/JPY that we forecast in June, when it was trading at 1.07 and 159 respectively. From here, we still favour the USD downside through both the rest of the year and 2025, as the Fed continues to

DM Rates Outlook: Rate Cuts Arrive Except Japan

September 24, 2024 9:00 AM UTC

•    For U.S. Treasuries, we see 2yr yields coming down further on our baseline soft landing view, as the Fed moves consistently to a 3.00-3.25% Fed Funds rate. However, with considerable Fed easing already discounted, 2yr yield decline should be modest and 2yr yields should bottom mid-2025. 1

China Steps Up Support, But Not a Game changer

September 24, 2024 8:39 AM UTC

China has surprised and cut the 7 day reverse repo rate by 20bps to 1.5%, with a 50bps cuts in the RRR rate.  Combined with other measures this is a step-up in support and could help GDP on the margin, but the measures are not game changers as monetary policy is currently ineffective.  While furth

Equities Outlook: Choppy U.S. and Outperformance Elsewhere

September 24, 2024 8:30 AM UTC

 •     We now forecast 5450 for the S&P500 for end 2024, but could see a move to 5200/5000 in the next 3-6 months as volatile data keeps the soft v hard landing debate alive.  On our baseline of a U.S. soft landing, we would see the S&P500 at 5600 by end 2025. The tech sector is still really i

Preview: Due October 4 - U.S. September Employment (Non-Farm Payrolls) - Initial claims suggest a stronger month

September 23, 2024 4:37 PM UTC

Lower initial claims suggest September’s nonfarm payroll will be a little stronger than the three preceding releases, which averaged 116k. We expect a 180k increase, with 150k in the private sector. We expect unemployment to be unchanged at 4.2% and an in line with trend 0.3% increase in average h

U.S. Outlook: Fed Focus Turning To Downside Risks

September 23, 2024 2:16 PM UTC

•    The U.S. economy is showing clear signs of labor market slowing which poses downside risks to the still impressive resilience of consumer spending, which has sustained healthy GDP growth through Q2 2024. We expect GDP growth below potential in the second half of 2024 and the first half of

Commodities Outlook: Fragile Foundations

September 23, 2024 9:30 AM UTC

Oil prices in the short to medium term will be shaped by demand in China and the U.S. In particular, we expect weak data in China to continue weighting on oil prices in Q4 2024, with limited upside risks from supply-side developments. In 2025, demand growth will likely remain slow in the first half,

FOMC eases by 50bps but otherwise not strikingly dovish

September 18, 2024 6:21 PM UTC

The FOMC has eased by 50bps with the dots looking for another 50bps this year (meaning 25bps at each remaining meeting) and a total of 100bps in 2025 (meaning only four 25bps moves). This would leave end 2025 rates at 3.25%-3.50%, still above a marginally upwardly adjusted neutral rate of 2.875%, wh