Financial Markets

The next rate hike is unlikely before September, despite the rebound in April retail sales. The dollar could suffer for a time, but the long-term bull market is intact.

Brazilian assets are no longer oversold, are not cheap, and the political reality will likely fall far short of market expectations. Investors should continue to avoid/underweight Brazilian risk assets.

The pace of U.S. oil supply destruction accelerated at the end of April, as yoy losses increased to 470 thousand barrels per day (Mb/d) for the week ended April 29.

Approaching the referendum on EU membership, what are the prospects for the U.K. economy and financial markets?

China's underlying final demand for crude and oil products (excluding changes in inventories) has been weaker than is suggested by its imports of crude oil. The government has used lower oil prices to accumulate strategic petroleum reserves (SPR). Commodities prices are at a risk from weaker China/EM demand going forward.

The reflation rally continues. Despite our bearish outlook for the year, we think the risks of the current rally lie to the upside given China's redoubling of stimulus at the expense of reform. Populist troubles are picking up in Europe, but we maintain our positive structural view and note that the migration crisis is slackening. Rather, the greatest risks of populism continue to flourish in the Anglo-Saxon world with Brexit and Trump.

The U.S. dollar has fallen to almost 5% below its 2016 peak. In this <i>Special Report</i> we explore the impact of a weaker dollar on key U.S. fixed income markets.

To cheaply hedge against a "Leave" vote, go long U.K. inflation protection, reduce exposure to U.K. corporate debt, and position for a steepening of the Gilt curve.

We continue to view the rally in equities and high-yield corporate bonds since February as a high-risk affair.

U.S. dollar softness has failed to lift equities of late, a tentative warning that correlations are changing as the U.S. economy cools.