Valuations

Stocks whipsawed violently last week. Volatility could intensify if recent whiffs of a domestic economic slowdown proliferate and the Fed still adopts a more hawkish tone.

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.

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.

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

The trading action of gold is currently sending a bearish message on the dollar as the price of the precious metal has broken above critical resistance. Though the causation between the dollar and gold usually runs from the former to the latter, gold also has a tendency to sniff out broad-based moves in the greenback. We remain broadly short USD in our portfolio.

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.

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

Financial conditions will continue to ease during the next few months, and the Fed will use its June statement to prepare the markets for a rate hike in September.

Absolute valuations on Euro Area corporates are not cheap, but there are relative value opportunities to take advantage of the ECB becoming a major buyer of corporates. Favor Euro Area High-Yield over Euro Area Investment Grade, and favor Euro Area corporates over U.S. corporates.