Macro

• Rise in US interest rate was widely deemed a catalyst for the Asian Financial Crisis (1997-1998). 
• So as US interest rate has remained moderately high in recent years, it makes people ponder the chance for another financial crisis in EMs.
• Most EMs that suffered from the Asian Financial Crisis have stronger fundamentals now and are salient according to the Greenspan-Guidotti Rule.

• Welcome to our weekly EM watch, which typically centers around developments in Asia and Latin America.
• We continue to see signs of Chinese efforts to balance global metals markets by exporting local excesses, while the export-sector driven growth in China limits the probability of major local fiscal stimulus to fuel domestic consumption.
• The softening of the USD side of the equation will likely leave local monetary authorities in a wait-and-see mode despite continued weakness in both CNY and JPY.

• Inverted yield curve used to predict stock market correction and economic recession.
• This relationship maybe losing as US is immersed in a long period of yield curve inversion, yet the economy and stock market thrive.
• ​The reason for the disappearing relation is multi-faceted, ranging from central bank policies to structural change of the economy.

• Stocks / In Depth: The key ingredients to sustain Hong Kong’s stock rally
• Power /Caixin Explains: Why China needs a new green power system and how it could work

• Kidnap /: Another case of kidnapped Chinese in Philippines emerges

• Another surprisingly strong GDP growth rate in May has extended output’s above-trend rise to the point where the H1 excess broadly matches the shortfall from H2 2023.
• Returning to trend would require flat output through Q3, but other indicators suggest growth is only slowing, not stalling, so that may be too pessimistic.
• Activity data do not signal policy as overly tight, although unemployment suggests it is a little tight. Nonetheless, rate cuts remain likely as policymakers look elsewhere.

• The Bank of Korea maintained the Policy Rate at 3.5%, consistent with the economic consensus, due to the need to confirm the continuation of slowing inflation trends and concerns over financial stability risks from exchange rate volatility and rising household debt.
• Global economic conditions, including differentiated monetary policies among major economies, geopolitical risks, and fluctuations in financial markets, will significantly influence future monetary policy decisions.
• Strong export performance and moderate growth are tempered by an uneven recovery in consumption and investment, alongside persistent financial stability concerns related to household debt and real estate project financing, guiding a cautious approach to future interest rate adjustments.

• Bank Negara Malaysia maintained the OPR at 3.00%, aligning with the economic consensus amid a cautious approach to managing inflation and supporting economic growth.
• Future interest rate policies will be influenced by global economic stability, the strength of the domestic tech upcycle, and the impact of domestic policy measures on subsidies and price controls.
• Inflation is expected to rise moderately in the second half of 2024 due to subsidy rationalization. Still, overall pressures are mitigated by targeted measures to support businesses, with headline and core inflation projected to average between 2.0% – 3.5% and 2.0% – 3.0%, respectively.

• US market tanks on Thursday and we suffer heavy losses for our long call position on a few tech giants.
• Small stocks thrive as chances of rate cuts increase, though we hold onto our non-consensus view of no Fed rate cut this year.
• Hong Kong market would likely move sideway between 16000 to 18000 levels.

• Hello everyone, and welcome back to our weekly positioning watch.
• Economic data from the US has been received by markets with a bit more skepticism after the recessionary ISM services report, and while the NFP report—judging by the markets’ reaction—made everyone from equities to fixed income happy, the overall picture of the US economy is still admittedly gloomier than we anticipated a few weeks back However, with increased access to real-time gauges of the economy, there is currently no reason to worry about a recession—or at least no reason to trade it.
• Recessions are always triggered by something; the economy almost never slow-drifts into one, which makes it impossible to time.

• WA gold explorers and developers are struggling in the market compared to producers
• Value gap between explorers/developers and producers has widened, with little progress in projects
• Cash balances are dwindling for many companies, raising questions for investors about the incentive to fund them

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• China disinflation process is clear in the June CPI data, with excess production and soft consumer spending producing a lower than expected outcome. 
• Combined with weak M2 money growth, parts of China economy remain weak and point to a softening of GDP growth in H2.
• So policy action will likely remain targeted, in face of the weak economy

• With the IDR stabilizing and inflation abating to 2.5%YoY in Jun’24, we expect a 25bp cut in the policy rate in the Jul-Sep’24 quarter. This should bolster hitherto-weak private consumption. 
• The fiscal deficit was a modest 2.2% of GDP in Apr’23-Mar’24; ‘Prabowo risk’ won’t be manifest until 2025. Until then, liquid banks (L-D ratio 86.5%) are well-positioned to drive growth. 
• At 11.75x, the equity market’s trailing P/E ratio is far below its 20-year mean of 16.16x. Given the stable macro backdrop, we recommend going Overweight Indonesian equities. 

• Welcome to another election-heavy Great Game as we continue the 2024 ballot bonanza.
• This week saw the pivotal elections in both the UK and France as well as a very different, but also very interesting presidential election in Iran.
• We’ll cover all three and what they might mean for investors.

• NOAA predicts an 85% chance of an above-normal hurricane season (Jun to Nov), with 17-25 named storms (winds of 39 mph or higher).
• Oil prices plunge 1.6% before and then rises 2.4% in the ten days after weather shock. Crude oil IV rises 8.7% in 10-days before and 10-days after the weather shock.
• Hurricanes impact offshore oil production & refinery operations in the Gulf of Mexico (GOM), which accounts for 14% of total US crude production and 48% of US refinery capacity.

• We already addressed the US CPI report in our “Week at a Glance”.
• Tomorrow’s US CPI report is the make-or-break moment we’ve been waiting for.
• To keep the risk asset party alive, we need a soft outcome, and it looks like we might just get it.

• Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.
• After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.
• Hautai Securities hits an all time low and becomes a “Catch a Falling Knife” chart.

• Recent acreage report shows benign planting figures and solid ending stocks for Corn sending its prices lower. Wheat also declined on higher stocks, while Soybeans rebounded.
• Wheat faces headwinds & tailwinds. Fundamentals are dragged down by favorable weather in exporting countries & imminent US harvest; Strong US demand & weak EU forecast has supported prices.
• Soybeans appear well supported from an unlikely ally in Trump. Import Duty tit-for-tat could see China slapping duty on Soy imports.

• Within the last years, where change has been the only constant, one thing remains unchanged: grocery shopping.
• Supermarkets have thus thrived, supported in recent years by pantry loading, eat-at-home trends, omnichannel capabilities, and increasing salaries.
• We are positive on the outlook for the space, with our covered companies expected to further benefit from increasing salaries and differentiation in value propositions, although the latter is a reflection of increased competition that we expect to continue.

• Expected core inflation is more policy-relevant than the current pace. Service price inflation is a suboptimal signal for predicting medium-term inflationary pressures.
• Median inflation is typically the best single measure for prediction, but many options exist. Baskets built from multiple statistical measures are consistently better signals.
• The most potent underlying statistical measures are stuck above a target-consistent pace, and wage settlements worryingly still signal excessive fundamental pressure.

• Bitcoin’s 11% drop was influenced by the German government’s BTC liquidations, large long position liquidations, and the start of Mt. Gox repayments, increasing market supply.
• Bitcoin’s downturn is countered by significant ETF inflows, indicating investor optimism. Concurrently, the fear and greed index’s low levels point to potential buying opportunities.
• Ethereum is poised for growth with upcoming ETF approvals likely to drive substantial spot buying, positioning ETH for relative outperformance against Bitcoin.

• Remember that we are replacing our “Something for your Espresso” with “The Week at a Glance” every Monday, featuring forward-looking expectations for the macro trading week ahead.
• This week is another make-or-break week in US macro as growth surprises have turned negative lately.
• This is not a major issue as long as the inflation surprises follow, as fears of weaker growth are alleviated by softer discount rates and lower inflation expectations in such a case.

• Takeaways: More pressures on freight rates… Still no spillover to PPI/CPI. Hedge funds appear to have an appetite for crude oil, but not so much for energy stocks. Macro data more tilted towards normalization rather than weakening.
• Greetings from a cloudy Copenhagen and welcome to another Energy Cable, following last week’s weak-ish ISM prints. Ready for more turmoil in shipping?
• A.P. Moller-Maersk A/S has announced that extreme weather conditions, including a storm surge along the South African coast, are expected to cause shipping delays.

• Inflation in the second half of June was above our expectations, at 0.53%, while core inflation was at 0.13%.
• So far, Banco de Mexico has not signaled that its monetary policy decisions will weigh core over headline inflation.
• Thus, it increases the likelihood for only one cut in the rest of the year.

• Power / Cover Story: China’s power market reform poised to level up as renewables plug in
• AI /: Everyone should have a say in making the rules for artificial intelligence, Singapore AI czar says
• Deutsche Bank: /Deutsche Bank sees rosy future in helping multinationals tap Chinese market

• Happy Sunday and welcome to our flagship editorial!The ISM Services report admittedly made for recessionary reading, and it is not because we have been blind to such risks.
• We just found the risk/reward in betting on them incredibly weak, and we continue to hold that view.
• We actually laid out exactly that roadmap to a recession in Q4 2023, and correctly forecasted that the re-acceleration in cyclical sectors such as Manufacturing would lead everyone to conclude that recession risks were off the table in 2024, with a major bull run in assets accordingly.

• Coming into June, we wrote that the biggest “risk” was that we moved towards a goldilocks scenario.
• While our portfolio returns have mostly mirrored that regime (outside of Crypto), we have to admit that the growth component of the equation has slowed somewhat relative to our model base case.
• We reassess the picture on a macro level and on a quant basis in this analysis.

• We haven’t made significant changes to our portfolio in recent days due to a lack of conviction in the current market price action.
• However, we are not blind to the risks currently present in the US economic cycle.
• The job market is normalizing linearly, but the risk is that it normalizes linearly until it weakens exponentially.

• Manganese ore, alumina, molybdenum, and chrome ore prices are up, while cobalt prices are down due to market surplus
• Precious metals like gold are well placed and resilient, with potential for record industry profitability
• Copper is still the best way to play the acceleration in global electrification, with potential opportunities in zinc and bulk commodities as well

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• A monthly review of how the markets and our themes are currently performing
• Analysing what went wrong and what went right in stocks and sectors
• Highlighting positions added or removed from the thematic investment portfolio

• US oil rig count stabilises at 479 as of the week ending on 5/July, after falling for five consecutive weeks.
• The US natural gas rig count rose by 4 to 101, yet it remains 34 rigs lower than the count from the same week last year
• Drilling activities in the US remain soft as upstream players prioritise shareholder returns over increasing output.

• The past week saw insights on Berli Jucker (BJC TB), Matahari Department Store (LPPF IJ), Sermsuk PCL (SSC TB), Barito Renewables Energy (BREN IJ), and Raffles Medical Group (RFMD SP).
• There were also insights on Yangzijiang Shipbuilding (YZJSGD SP), Thai Union Group (TU TB), and CrossASEAN Ground Zero which looks at Campina Ice Cream, Xurya, and Mayapada Hospital.
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

• ISM vs Commodity Prices The latest ISM Manufacturing data came in lower than expected. It almost seems like economic momentum in the US is fading.
• But on the other hand, commodities that are most sensitive to change in economic momentum, namely copper and crude oil, remain in a sideways consolidation or in the case of crude are already breaking out to new short-term highs.
• That price action behavior opens up a gap between both metrics, and one thing is clear.

• Despite opinion polls, the ‘cordon sanitaire’ in France has successfully kept Marine Le Pen’s Rassemblement National from forming a plausible government.
• This outcome, however, comes at a high cost in the short-term.
• The medium-term implications of this political situation are also significant.

• Even as global manufacturing trade faces the prospect of “slow-balization”, trade in services shows no sign of peaking, providing an opportunity for emerging Asia.
• While advanced economies currently dominate world services exports, emerging Asian economies have opportunities to carve out niches in specific sub-segments. 
• Key to succeeding in this new arena are human capital, including proficiency in the English language, as well as a liberal stance towards foreign and domestic service exporters.

• Consumer confidence measures have been generally weaker in H1, thereby suggesting a major improvement in underlying spending trends is unlikely in the near-term. 
• House price inflation has moderated due to lower demand, while banks have not loosened lending standards across all categories of mortgage loans. 
• Recently released minutes of the latest FOMC meeting indicate that members expect the economy and inflation to cool, but they are in no hurry to lower the federal funds rate.

• Numerous warnings about a toppy market have been appearing , but they tend to be “this will not end well” warnings with no obvious bearish trigger.
• Long-Term risks to equity prices are rising, but short-term price momentum is strong.
• We believe that your decision to be bullish or bearish will depend on your time horizon.

• Copper rebounded last week, rising 4% on the LME and 6% on the COMEX, led by improved sentiment but in line with most of its commodity complex peers.
• Check out our initiation, Copper Primer: What We Like About Copper and What to Play, and our equity initiation, Southern Copper: In a League of Its Own. 
• We provide updates on the long copper-short gold trade we explored last week and the iron condor in Freeport Mcmoran (FCX US) 

• Recent economic data is signaling a trend of growth deceleration, which raises the odds of a September rate cut.
• Political considerations may derail a September easing decision as Powell may not achieve a unanimous vote, which would open the Fed to charges of interference in the electoral process.
• The Supreme Court’s recent repudiation of the Chevron decision also opens the door to constraining future Fed policy to stabilize the financial system in the event of a crisis.

• Japan has suffered from a balance sheet recession, triggered by a sharp decline in asset value, since the 1990s.
• As the Nikkei treads new height, it raises the question of whther the balance sheet recession is over.
• Though some of the structural challenges remain, the balance sheet recession has improved in recent years.

• Corn and Wheat planted acreage are down 3% and 5% YoY, respectively. Meanwhile, Soybean total planted area is up by 5% YoY compared to 2023.
• Planted acreage and ending stocks drove prices down for wheat and corn. Soybeans bucked the trend as reported acreage fell short of WASDE estimates by 400k acres.
• A positive picture for 2024 planting season is visible, with the early benefits of warm temperatures and improved moisture levels setting the stage for strong yields.

• In June 2024, the Hong Kong Service PMI improved to 49.6, up from 43.9 in May. This indicates that while the sector is contracting, the contraction rate has slowed significantly.
• Unemployment levels remained stable. Additionally, there was an increase in input cost inflation, and business confidence reached a five-month high​​.
• Though the services PMI improves, long-run factors such as northward spending of residents, outflow of human labours, and corrections in housing sector will continue to weigh on the economy

• It is estimated that 0.8 million Hong Kong residents spend weekends at other Bay Areas
• These residents spend an average of HKD730 on a weekend in Shenzhen
• The value-added factor for food, alcoholic drinks, and tobacco as well as retail trade are both  0.12, which gives 3.64 billion HKD, or 3.5% in annual GDP

• Anticipation of an extensive stimulus package at China’s Third Plenum, aimed at revitalizing the decelerating economy, is driving a rebound in iron ore prices.
• China’s iron ore imports have increased by 7% year-over-year despite a 3% decline in steel output, leading to a buildup in inventories on-shore. 
• The convergence of technical signals and seasonal trends in the SGX TSI Iron Ore Index suggests a bullish market stance, highlighting potential profit opportunities.

• China and Hong Kong saw positive ETF flows for the week.
• Dividend Yield, Low Volatility and Value strategies have outperformed during the market correction in Hong Kong.
• Lufax Holdings jumps after announcement that Ping An will increase stake.  Fufeng slumps after announcing a decline in 1st half profit.

• Combined entity of Paladin Energy and Fission Uranium expected to command a market capitalisation of USD 3.5 billion.  
• Following the Russia-Ukraine war, uranium miners started looking for alternative sources in low-risk regions, putting focus on US and Canada.
• Post-Merger, Paladin will have the second-largest resource base of any listed uranium miner in the Western Hemisphere, second only to Cameco.  

• With markets and policy makers very much focused on inflation, the EZ labor market continues to shine –apparently. Indeed, the EZ jobless rate has remains at a record-low of 6.4%.
• That will perturb ECB hawks wary of higher ensuing wage pressures.  
• But this apparent record-low may exaggerate the tightness in the labor market.

• US Nonfarm Payroll additions for June 2024 surpassed expectations, however, showed a slowdown compared to prior months, particularly in private sector hiring.
• There is an increase in unemployment and only modest wage growth, indicating a weakening labour market.
• This economic situation is likely to prompt a Federal Reserve rate cut in the near future.

• UK, France, and US voters are showing support for opposition parties in recent elections, with a notable shift away from Biden in the US. Central banks in these countries are expected to make cuts in August and September.
• Upcoming events include monetary policy decisions from the Reserve Bank of New Zealand, Bank of Korea, Bank Negara Malaysia, and Central Reserve Bank of Peru.
• The second round of French elections and US inflation data are anticipated to be the focal points for global markets, with a potential September cut from the Federal Reserve if outcomes are benign.

• The three risk-off signals include the decline in the Bitcoin price, decline in the copper price, and the first day share price performances of recent Korean IPOs.
• These three risk-off signals are offset by one major risk-on signal which includes the U.S. Junk Bond-Treasury Yield spread. 
• An important risk-off signal is the first day share price performances of major Korean IPOs after listing. We have started to see some weakness on this signal in July. 

• Central bankers in advanced economies, while pausing, cutting and hiking, continue to debate underlying or trend inflation developments 
• My estimate of underlying inflation for the G3 overall, which zeroes-in on the Most and More Persistent categories, trended lower recently  
• The estimated level of underlying G3 inflation in May was approximately 1%-point above the pre-pandemic average

• Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher end of the cost curve at around 100 USD/ton. 
• Coking coal prices are expected to bounce due to the Anglo incident, and we believe the 65-62 spread will benefit, moving out of its mid-teens band. 
• We like iron condors (set up details in the insight) and high-grade ore producers Rio Tinto Ltd (RIO AU), Vale (VALE US).

• Welcome to our weekly EM Watch series, where we focus on the diverging economic trends in China, where local consumption seems to be on the floor, while the export sector is still gaining momentum.
• Additionally, an interesting niche case in Panama requires some attention.
• The USDCNY pressures are more fierce than they have been at any time since the pandemic, and we are once again approaching the intervention zone around 7.30 in USDCNY.

• Recently, numerous JPY pairs have breached the levels where the BoJ / MoF intervened in April/May, prompting markets to wonder if (and when) authorities might step in again to support the Yen.
• The reaction in USDJPY post key events/meetings has been consistently uniform for the past 12-18 months.
• Markets build up a hawkish narrative prior to the event, only to unwind positions when the news turns out to be less hawkish than anticipated.

• US crude oil inventory declined by 12.2 million barrels as of the week ending on 28/Jun, the biggest drawdown since July 2023.
• Henry Hub prices continued to decline from last week due to increased production and cooler weather forecasts.
• Saudi Aramco awarded over USD 25 billion in contracts for gas expansion. Goldman Sachs lowered its target price on Saudi Aramco but maintained its “Neutral” rating.

• Carbon / In Depth: China’s push to expand its carbon market Big changes are afoot for China’s three-year-old national carbon market.
• Kidnap /China calls for severe punishments after kidnapped victims murdered in Philippines
• Crypto /CSRC official likely used cryptocurrency to hide bribes, sources say

• The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
• For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
• For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won. 

• The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy.  However, they are unlikely to be game changers.
• Major points to observe include unemployment and healthcare benefit boost, Hukou fine tuning, discussion about inheritance tax, and the 2-4 trillion Yuan of buying most unsold homes.
• Deepening of reform especially in boosting innovation and upgrading consumption will also be touched on, but there will seem no short-term effective measures.

• The incoming Labour government is prioritizing securing a second term from the start.
• The promised “change” in their manifesto will be gradual, aiming for a modest boost in economic growth.
• More radical measures are anticipated to be implemented in the potential second term.

• Despite more than doubling in the past 4 years, the BSE-Sensex is fairly valued (trailing P/E of 24.04x) relative to its 10-year mean (23.93x)– helped by sustained EPS growth. 
• The trailing P/E is above the 20-year (21.34x) and 30-year mean (20.4x), but those reflect weaker growth prospects in earlier decades. 10yr mean better reflects new normal 8% RGDP growth.  
• Net FPI inflows reached a record USD10.14bn in Dec’23, when the market was similarly valued. FPI flows into equity were minimal in H1CY24, but likely to rebound. Stay moderately Overweight. 

• Bonds / In Depth: China’s ultra-long bonds may test PBOC’s monetary toolkit
• Badminton /: Teenage Chinese badminton star’s death draws criticism of first responders
• Central bank /: PBOC bond-borrowing plan fuels expectation of action to raise yields

• This week we look at the potential sale of Campina Ice Cream and the dairy space and the fundraising plans of Mayapada Hospital with M&A picking up in healthcare.
• We also take a look at the latest fundraising by Indonesia’s solar operator Xurya as investors are drawn towards sustainable power investments but see potential headwinds. 
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• Fixed investment grew 0.9% MoM, driven by investment in both residential and infrastructure construction.
• Investment in imported machinery continued to outperform investment in domestic assets due to the strength of the Mexican peso.
• In April, gross fixed investment in the country reached its fourth consecutive month of expansion, supported in the first two months by investment in machinery and equipment, and in the following two by investment in construction.

• Amid all-time highs, the S&P 500 faces recession risks with economic indicators like unemployment and housing starts signaling downturns, impacting broader market stability.
• The S&P 500’s growth, heavily reliant on mega-cap tech stocks, contrasts sharply with broader indices, driven by AI advancements and global revenue streams, suggesting market top-heaviness.
• Given recession precursors and market frothiness, a spread trade using CME’s Micro E-Mini futures (Long S&P 500 and Short Russell 2000) is proposed to balance potential gains with reduced risks.

• Singapore’s REITs, representing 12% of the equity market, face pressures from rising interest rates and economic downturns, which impact profitability and market performance.
• The data center REIT sector is propelled by increasing AI applications, data sovereignty laws, and the growth of cloud services, positioning it for significant expansion.
• Digital Core REIT benefits from its presence in key tech hubs and high-performance computing offerings, positioning them to outperform in a tight data center market.

• It’s not like we haven’t had this discussion a few times already this cycle, but the recession chatter is staring at us again after the weakest ISM report in years.
• The percentage of respondents reporting higher New Orders has weakened to levels only seen during the GFC.
• So, is it time to buy puts and canned food and head for the cellars?

• We are against the majority opinion that Fed will cut rate in September meeting. Also majority forecast there will be 1-2 rate cuts this year but we forecast none.
• CORE PCE Price Index has been treading above 2% target, though it is on a decreasing trend two streaks on a roll and since Jan 2023.
• We believe instead of targeting at the static CORE PCE Index for one data point, the Fed will consider a dynamic series of data points, known as cumulative inflation targeting.

• In a recent forum, Chinese Premier Li Qiang is confident that Chinese economy was stagnant simply because of COVID. Now that COVID has gone, Chinese economy will eventually heal itself.
• We believe rather Chinese economy will still be bumpy after COVID, with three major arrows against Chinese Economy, namely property sector slump, local government debt, and weak private sector.
• Instead of the “self recovery” view of the economy proposed by Li, we believe government should more actively roll out fiscal and monetary stimulus.

• PBOC announced that it will borrow and trade treasury bonds from primary markets. 
• The central bank will use Open Market Operations to not only control and steepen the yield curve, but also improve market liquidity.
• Last week the 50-year bond dropped below the 2.5% yield which was the minimal threshold the PBOC indicated before defense.

• China’s latest consumer data will do little to convince the leadership to significantly step stimulus in the upcoming Third Plenum as support for advanced sectors remains key.
• Beijing’s refraining from significant stimulus is deemed a feature, rather than a bug. Policymakers do not yet view the trade-offs as unmanageable. 
• While some incremental step-up in policy support may be on the cards, do not expect Beijing to rock the boat beyond that. 

• While global economic conditions have been “so far so good”, there are signs of trouble that, while manageable for now, could darken the outlook if they spiral out of control. 
• On the upside, conditions in major markets such as the US and China are stabilizing, while global capital spending and technology cycles should be favourable for Asia. 
• While the risks are growing, resilient domestic demand and appropriate macroeconomic management should shield Asian markets from the worst of the downsides. 

• After a 0.99%MoM annualised rise in May’24, core PCE inflation eased to 2.57%YoY — lower than the 2.6%YoY end-CY24 projection that the FOMC believed was compatible with 3 rate cuts. 
• While the FOMC initially signalled QT in Jun’22, base money increased each month during Jul’23-Feb’24, contributing to higher inflation. Contracting base money since Mar’24 was key to moderating MoM inflation.
• Core PCE will likely rise 2%QoQ (annualised) in Q2CY24, and 2.5%YoY in Jun’24. The release of those numbers six days before FOMC decision (31/7/24) will likely trigger Jul’24 rate cut. 

• Hello and welcome to this week’s Great Game.
• The First Round of the French Legislative Election was held on Sunday and the initial results suggested a clear win for Marine Le Pen’s far-right coalition around her National Rally party
• Biden is starting to drop rapidly in polls after the US presidential debate.

• The Euro area unemployment rate stayed at 6.4% in May 2024, indicating a stable labour market as it is below long-run and one-year averages.
• Economic indicators showed moderate GDP and employment growth, reflecting a cautious sentiment in the market.
• Services sector is expanding while the manufacturing sector is contracting, suggesting sector-specific challenges and potential inflationary pressures.

• EA inflation matched consensus expectations of 2.5% y-o-y in June despite German softness as a Benelux surge offset it, with the outcome 6bps above our forecast.
• Services inflation was responsible for the upside again, as it was worryingly stuck at 4.1%, suggesting there has been no underlying progress in the past several months.
• The stability of headline outcomes to past expectations reassures the ECB, keeping September alive for another cut, assuming its peers deliver on their bias to start soon.