Developed Countries
In most developed economies, rising inflation expectations will lift them further above the 2 percent target, limiting the scope for further interest rate cuts. But in Japan, rising inflation expectations will lift them up to the BoJ’s 2 percent target, removing the BoJ’s justification for its zero-interest rate policy. The normalisation of Japan’s monetary policy poses a big structural risk to stocks because Japan has been the main source of financial market liquidity, and thereby, of rising stock market valuations. From a timing perspective though, wait until the complexities of the price trends in USD/JPY and/or Nasdaq versus 30-year T-bond have collapsed. Plus: go tactically long copper.
Oil prices have broken out above resistance from a tight trading range since the holidays. We attribute this latest rally to geopolitical tremors more than a vote of confidence from markets on global growth given softening data. The global economy is…
November factory orders in Germany widely missed estimates, falling by 5.4% m/m, worsening the 1.5% October decline. Excluding major orders, which often distort the overall picture, core new orders fell 1.7% y/y after growing 5.7% in October. The European…
Our GeoMacro strategists published their Alpha Report, outlining their view that President Trump will have to pare back his fiscal ambitions to avoid a bond market riot. The long end of the US bond market continues to sell off, reinforcing our…
The December ISM Services PMI beat estimates, increasing to 54.1 from 52.1 in November. All subcomponents increased except for employment, which nonetheless remains in expansion. The prices paid component was especially strong, increasing to 64.4 from…
Our Global Asset Allocation strategists published their monthly tactical asset allocation report, where they illustrate booming expectations in the US will be self-limiting. For the first time since 2022, US GDP growth is expected to start the year above…
Job openings once again beat expectations in November, increasing to 8.1m from 7.8m in October. However, hires and quits decreased and layoffs increased. The gap between quits and layoffs, a leading indicator of labor market demand, ticked down. The jobs gap,…
December euro area inflation met expectations, with headline HICP printing at 2.4% y/y from 2.2% in November, and core steady at 2.7%, above the ECB’s target. Services inflation remains elevated at 4.0% y/y, up from 3.9% a month prior. While services…
Our US Bond Strategy team published their outlook for the Fed in 2025. They expect more cuts than the 50 bps signaled by the Fed at its December meeting. Core PCE inflation is tracking well below the Fed’s 2.5% forecast, while unemployment could exceed…
Economic data released over the holiday period extended recent trends, reflecting a softening global economy with resilient US growth, and an ailing manufacturing sector. The December global manufacturing PMI declined to 49.6 after reaching the 50 level…