大中華

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.

特別レポート

The end of the Debt Supercycle will be a key theme influencing economic and financial trends for many years to come. Its hallmark will remain the inability of central banks to engineer a new credit cycle, despite extremely low interest rates. China is one of the few remaining countries where the Debt Supercycle has yet to end, and history suggests the catalyst for a turning point will be a financial crisis.

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.

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

China's reflation policies have succeeded in reviving iron ore and steel prices, which are up 45.6% and 52.6% from their January lows, along with the profitability of domestic steelmakers.

The powerful short covering bounce in the S&P steel index is starting to fizzle. The latest upleg had been driven by a surge in Chinese domestic steel prices. That, combined with news that the country plans to reduce steel capacity in the coming three to five years, was enough to send shorts scrambling for cover. However, it will take time for the global steel market to rebalance. In the short run, the jump in Chinese steel prices has already encouraged domestic producers to re-ramp steel production (second panel). Persistent sluggishness in indicators of China's domestic consumption mean that steel inventories are likely to build as production picks up anew, which will put upward pressure on exports to the rest of the world. Fading construction growth and tightening lending standards in many developed countries suggest that increased steel supply from China will have a negative impact on steel prices. We reiterate our recent downgrade back to underweight. The ticker symbols for the stocks in this index are: BLBG: S15STEL - NUE, STLD, RS, X, CMC, ATI, WOR, CRS, AKS, TMST, HAYN, SXC, ZEUS.

特別レポート

It is widely perceived that China suffers from a massive capital misallocation problem. Our indicators defy this conventional wisdom.

The factors that drove the recent rally - Fed dovishness, China reflation, and a pickup in economic data - are largely over. 

Reflation continues to dictate short-term market moves. Behind this sugar-high, the global economic backdrop remains poor. Commodity currencies can rally for a few more weeks, but once markets refocus on Chinese and EM core weaknesses, commodity currencies will make new lows. Within the complex, favor the NOK and the CAD over the AUD and the NZD. Our portfolio remains positioned for additional yen strength.

The Fed's statement underscored its 'go slow' approach, with a June hike increasingly unlikely, but September and December still in play. The BoJ stood pat, reluctant to admit that NIRP was a flop soon after it was launched. Nevertheless, we expect fresh easing this summer. Chinese stimulus should last a few more months, but commodities will resume their structural downtrend thereafter. Remain tactically bullish risk assets; be prepared to turn more cautious in Q2.