Macro

• The April CPI release, though market friendly, did not change the overall message  
• The key message that inflation is still above the Fed’s goal and that the level of trend inflation is uncertain remains unchanged  
• Although market-based expectations for a rate cut improved after the CPI data, the odds of potential Fed action are unsettled   

• Tariffs /Caixin Explains: How will the U.S. import tariff hikes impact Chinese industries?
• Corruption /: Bribes, booze and books uncovered in veteran securities regulator’s corruption probe
• Micro Connect /: Charles Li’s Micro Connect rallies key employees to invest in ‘leading sheep’ program

• Hello everyone, and welcome to a short and sweet look at the current business cycle, what to expect, and which assets to buy ahead of what could be significant cyclical expansion.
• April data has in general been week in our models and nowcasts, which was reflected in the fairly dovish CPI report yesterday.
• However, May actitivity is picking up momentum again, and our Truck Demand indicator points to the business cycle picking up again from May onwards.

• Although the Fed paused rate hikes in July 2023, the dollar remained strong buoyed by the US economy outperforming other advanced economies.  
• A strong dollar usually benefits domestic businesses and small caps but hurts export-focused companies and large caps in the US.
• The current account deficits of emerging nations have been worsening due to the strong dollar and rising energy prices.

• Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year.
• We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.
• We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.

• The BSP maintained its policy rate at 6.5%, aligning with the consensus forecast, reflecting a balanced approach amid persistent inflationary pressures and moderated economic activity.
• While the inflation forecast for 2024 eased slightly to 3.8%, the forecast for 2025 increased to 3.7%, indicating persistent inflation risks from higher transport, food, electricity, and oil prices.
• The BSP’s restrictive policy stance aims to anchor inflation expectations and ensure price stability, with readiness to adjust policy settings as necessary, supported by government measures to address supply-side pressures.

• The unemployment rate in Australia rose to 4.05% in April 2024, exceeding the predicted 3.9% and marking the highest level since January.
• This increase occurred despite a significant employment boost of 38,500 in April.
• The rise in unemployment was due to a faster growth in the labour force.

• Rate cuts are rare outside of recessionary regimes. The 1998 experience seems a more similar historical example for the BoE than 1989 or 2005, when its policy diverged.
• CPI inflation will probably be less benign because wage growth is much higher, so sterling may not stay as stable. The speed of possible policy reversal would be critical.
• Loosening monetary conditions when the real economy doesn’t need it risks stimulating a financial bubble. Carefully hedged investments would help avoid the eventual bust.

• Main Takeaways: Core inflation is still way too hot, but this report speaks well to the crowd hoping for rate cuts.
• Food and Shelter are the two dovish surprises… Both are re-accelerating in live data which will likely come into effect laterApril was super soft in real-time activity data and there isn’t much to suggest that it will continue in May, where data is on the rise again… But for now, this feeds the FCI loop in a positive sense, which will allow risk assets to ride the dovish CPI wave for now.
• US Headline CPI rose 0.31% on the month, whilst core inflation increased by 0.29%, with consensus at 0.4% and 0.3%.

• Hello everyone, and welcome back to our weekly Positioning Watch – insights into how market participants are positioned.
• Markets are waiting patiently for the US CPI report today before placing their bets it seems, with little to no action seen yesterday and in European opening hours yesterday.
• As elaborated upon in our “Week At a Glance” on Monday, we see hawkish surprises to both headline and core inflation , which will not be good news for markets, who have seemingly returned to their hopes of rate cut(s) this year.

• Insurers / In Depth: China’s weaker insurers skip early bond redemptions amid growing financial stress
• China-Russia /: China invites Putin for state visit
• Justice /China: seeks to eliminate regulations that hurt business environment

• China is following the Fed’s playbook of keeping market momentum going with good news and actions
• The HK dividend scheme is a prime example of that
• The latest proposal for unsold properties will remove a major barrier to a bottom in the property market.

• Eurostat’s second estimate confirmed the EA’s 0.3% q-o-q rebound out of technical recession. That fully recovers the H2 fall, although it was partial for Germany.
• Employment growth matched GDP in Q1, extending the persistently poor productivity performance. Eastern Europe’s structural catch-up is a relatively small bright spot.
• Jobs-intensive growth is keeping unemployment at its lows even as it rises elsewhere. EA potential looks relatively impaired rather than facing tighter monetary conditions.

• Welcome to our weekly EM editorial where we shed light on the most important developments in the EM space in the context of the impulses from the USD markets.
• Things are heating up in the global macro space as we are standing at crossroads.
• Is the macro momentum finally rolling over globally (including in the US) or are we amidst a potential rebound from China that wreaks havoc with the current increasingly dovish Western consensus?

• US CPI inflation in April 2024 slowed to 3.36% year-on-year, slightly lower than the consensus estimate.
• The Core CPI rate in April 2024 matched expectations by slowing to 3.6% year-on-year.
• Despite the improvement, the Core CPI rate still indicates excessively high underlying pressures.

• Welcome to this week’s geopolitical update, the Great Game.
• This week we’re covering Putin’s surprise sacking of Defense Minister Shoigu as well as the ongoing global EV war.
• Russian President Putin has replaced his Defense Minister Sergei Shoigu with former economic advisor and Deputy Prime Minister Andrei Beluosov.

• Our favorite survey out of the US economy was published earlier and it was a pretty decent report overall as the sentiment among SMEs improved, but there are a few trends worth noting in the details, so why don’t we briefly walk you through them here.
• For the first time in a long while, we see a clear net/net decrease in expectations for future price hikes.
• This is conciliatory news for Jay Powell and his ilk for H2-2024 (but not before then..)

• Property / Cover Story: Will China’s latest policy call-to-arms turn the ailing property market around?

• Corruption /Exclusive: Two ChemChina ex-leaders during Syngenta deal hit with corruption probe

• Audit /Accounting: firms in China required to store audit data on mainland under new rules

• Even though manufacturing data and headline HICP year on year in the Euro Area are screaming for easier financial conditions, the ECB seems reluctant (or at least slow) to cut rates and rather prefer just to be the lagged Fed.
• If it is fear of wider real rates spread towards other currencies, especially the USD, then we argue that Lagarde & co don’t need to worry.
• Firstly, because we find arguments from the past 10 years that EUR/USD can go higher even in an environment in which USD – EUR real rates spread widen and that real rates is not the only macro factor in determining the EUR/USD path.

• UK unemployment increased again to 4.3% in March, as expected. The Q1 deterioration still looks spurious, like the preceding strength, but the extent of change is slowing.
• Vacancies are falling, but so are redundancies. Incumbent workers enjoy high pay increases despite reduced demand for new workers amid broadly high expectations.
• Average earnings surged beyond expectations again. The absence of progress in pay settlements prevents slowing to a target-consistent pace, but the BoE seems unfazed.

• Last week we learned that the so-called “excess savings pool” from the pandemic had vanished into thin air in the US, or rather that personal savings have been running sub-trend long enough to bring savings back to a normalized state.
• This does not mean that US households have run out of savings, it merely means that savings rates are running below trend, which is not out of the ordinary during late-cycle economies.
• We have recreated the study on German numbers and found much less “alarming” trends in German households, which goes to show that the methodology developed by the San Fran Fed ought to be taken with a pinch, if not even a truckload, of salt.

• The period of easy US monetary policy after the global financial crisis did not produce excessive private investment in the real economy, while financial markets became the major beneficiaries.
• US productivity growth has persistently struggled to replicate the impressive performance witnessed during the late-1990s, thereby forcing companies to raise selling prices in the post-pandemic environment to preserve operating margins. 
• The recent stalling of the US disinflationary process may reflect the continuation of disappointing productivity growth as firms continue are still relying on price rise to preserve profit margins. 

• Welcome to the weekly “The week at a glance” publication where we look at the key figures during the week ahead and how to trade them.
• We have already been banging the drum on the upside risks to the US CPI, but the risk picture is also tilted in a hawkish direction for GBP and SEK rates over the next week.
• Meanwhile, we expect China to surprise negatively, which once again puts the spotlight on the USD/CNY fixing.

• Investors Flock Back Into Commodity Funds Investors are increasingly flocking to commodity funds again.
• A net €353 million flowed into funds from the Morningstar Broad Basket Commodities category in Europe in April.
• This was by far the best month for the category in over two years.

• The past week saw insights on GoTo Gojek Tokopedia (GOTO IJ), Sido Muncul (SIDO IJ), Great Eastern Holdings (GE SP), Singapore Airlines (SIA SP), and Lippo Malls Indonesia Retail Trust.
• There were also macro insights on Malaysia, the Philippines, and Singapore, and the latest CrossASEAN Ground Zero insight on the digital economy and other ASEAN themes. 
• 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.

• Donald Trump may return to the White House in 2025 with a potentially damaging agenda for Europe.
• This agenda could have significant economic and political implications for Europe.
• Europeans are advised to pay closer attention to Trump’s speeches and take his words seriously.

• Bloomberg Audio Studios podcasts offer news and analysis on various topics
• Discussion on FOMC presser and Fed’s reaction to inflation and interest rates
• Impact of US economy on global markets and the role of central banks explained by strategist Victor Schwetz

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

• India’s CPI inflation in April 2024 was 4.83% y-o-y, consistent with expectations and the previous month’s rate.
• This rate represents the lowest inflation since May 2023.
• The current inflation rate is below both the one-year average and long-run average, potentially impacting economic policies and decisions.

• Indonesia’s 5.1% growth in 1Q24 was underpinned by a larger contribution by public expenditures due to election financing and state-led capital projects
• Net exports, however, entered contraction as the economy’s reliance on commodities and China as an export market start to take their toll. 
• Even if headline growth remains stable for the year, the downside risks from a muted trade outlook and domestic policy uncertainty warrant caution. 

• Asian exports have become more concentrated in the past decade, both in terms of a narrower set of export partners, as well as lower levels of diversification of export products. 
• While some of this concentration is driven by benign factors, reduced trade diversification comes with key risks that have become more salient in the current geopolitical environment. 
• Government strategies in the region are underway to remedy some of the downsides, and this will be a key component in the broader trend of supply-chain realignments in the region.

• A review of technical and sentiment conditions shows that stock prices are setting up for a sustained advance.
• The combination of strong momentum, good breadth and skeptical sentiment points to higher stock prices.
• Key risks are evidence of a disturbing relative strength by defensive sectors and an upcoming CPI report that could upend the bullish narrative.

• We believe AI is overhyped in the short run and underhyped in the long run.
• Recent instances of earnings report reactions of stocks in the AI ecosystem indicate excessive frothiness and even AI bellwethers like NVDIA have begun to consolidate sideways.
• A St. Louis Fed study of the pace of technology adoption suggests that AI adoption will undergo a long cycle like the PC, so investors need to be patient.

• A weekly review of recent events impacting our investment themes
• Changing consumer preferences impact the Chinese May day  travel data
• Cosnumers in the US and Japan face different issues  with real incomes declining

• Central bank decisions came as expected with cuts or cautious progress towards them, but the Bank of England’s unexpected guidance disrupted predictions and market pricing. An August cut is now anticipated, though there are concerns it could be a mistake.
• Next week, macro data is expected to drive the market more, with US inflation data due on Wednesday, UK labour market data on Tuesday, and ongoing updates on HICP, GDP, and employment around the Euro Area.
• The only notable rate decision expected is from the Philippines.

• We were honestly puzzled by the weakness in Manufacturing PMIs in April as our models pointed in the other direction.
• The timely data delivered by daily congestion numbers point in a positive direction (also adjusted for seasonality), which is typically a strong sign that the lagging consumption numbers (of energy, food and the likes) will see upside.
• The congestion based now-cast from ports, roads and air data sources point to 5-6% YoY increase still and the US truck market demand index rebounded in the first few weeks of May as well after a soft path in April.

• Norway’s CPI inflation decreased from 3.9% to 3.6% year-on-year in April 2024, slightly exceeding market expectations of 3.5%.
• The small decline in inflation was driven by an unexpected increase in core inflation.
• Core inflation was at 4.4%, 0.1pp higher than market expectations.

• Welcome to our monthly flagship asset allocation analysis – the “Macro Regime Indicator”.
• Coming into April, we wrote that “The macro environment is turning worse on both inflation -and liquidity metrics, while the growth variable remains positive (measured by the cyclical manufacturing momentum).
• This leaves us in a classic “QT” environment with less obvious “gung ho” risk taking through April compared to the full-on risk positive environment we have seen over the past 4-5 months as continuously flagged and traded via our allocation tools.”Without the growth parameter being a home-run in our models, we mostly got the April correction right and also capitalized decently well on the liquidity withdrawal and the hot inflation report.

• This week we look at the noise surrounding the entrance of new EV players to Indonesia and suggest that Astra International is well-positioned to face the renewed competition. 
• We also look at CVC’s move on Siloam International Hospitals, Kopi Kenangan’s expansion plans, and Microsoft’s commitment to invest US$1.7bn in the AI space in Indonesia. 
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• KRX’s monopoly is expected to end next year with the launch of ATS (Alternative Trading System) sometime in 1H 2025 (as early as March) in Korea.
• The company that is responsible for operating the ATS is called Nextrade which was established in November 2022. Nextrade’s ATS received its preliminary approval in July 2023. 
• Korea Exchange has been a money making machine. Although there have been repeated discussions of a potential listing of Korea Exchange in the past decade, this has yet to materialize. 

• US commercial crude oil inventory fell by 1.36 million barrels for the week ending on 3/May, after rising by 7.3 million barrels the week before.
• EIA increased its global liquid fuels production for 2024 and 2025 by 110,000 bpd and 40,000 bpd, respectively.
• EIA forecasts OPEC’s spare production capacity around 4 million bpd through 2025.

• The BoE’s unsurprising decision to maintain the Bank rate at 5.25% was accompanied by rare pushback against prevailing market pricing. MPC members are more dovish.
• June’s outcome will depend on developments in their inflation persistence assessment, including wage settlements where the current data are tracking excessively high.
• That upside seems unlikely to discourage the MPC for long, so we now expect the MPC to start cutting in August but with a pause in February and a risk of a reversal.

• Series of mysterious and unexplained stock market crashes involving major companies like Viacom, Discovery, Tencent, and Baidu
• A little-known family office called Archegos Capital Management led by Bill Hwang is revealed to be the mastermind behind the chaos
• Bill Hwang’s past involvement in hedge fund scandals and illegal activities sheds light on the criminal nature of the implosion of Archegos Capital Management

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

• In the second half of April, headline inflation stood at 0.25% bw.
• In the fourth month of the year, inflation rebounded from 4.42% YoY to 4.65% YoY due to pressures in the prices of some agricultural products and gasoline.
• In contrast, core inflation continued its downward trend, decreasing from 4.55% YoY to 4.37% YoY in April.

• The decision by Bank Negara Malaysia to maintain the OPR at 3.00% aims to balance the need to support economic growth while managing domestic inflation amid complex global economic challenges, including persistent inflation and geopolitical tensions.
• Moderate inflation levels in early 2024 and a positive economic growth outlook underscore the effectiveness of the current monetary policy—however, the policy trajectory links to developments in subsidy and price control measures and global economic conditions.
• The ringgit’s valuation and stabilization are critical concerns for the MPC, influenced by external monetary policies and geopolitical factors, with ongoing strategic interventions to align the currency more closely with Malaysia’s economic fundamentals.

• The anomalous behavior of the unemployment rate bears further monitoring
• The ongoing labor market rebalancing could prospectively result in a higher unemployment rate with a lag
• While the April survey data implies potentially soggy headline growth in 2Q 2024, my weekly recession odds indicator remains relatively benign for now 

• Q1 Performance Analysis for active Global EM funds.  Country/Sector/Stock Positioning relative to benchmark for Global funds
• Spotlight on Indonesia activity among Asia Ex-Japan investors.  Sector Dispersion in USA funds
• Extreme Stock Positioning in UK Small/Midcap funds. Ownership Trends in the Financials sector among MSCI China funds.

• Rate hikes are unlikely to resume unless forthcoming cuts prove premature. Cutting outside recessionary regimes has historically been prone to reversals to higher peaks.
• 1998’s cuts followed a shock that failed to prove recessionary. Fed cuts in 1967 sowed the seeds of a severe inflation problem. Both cutting cycles were more than reversed.
• Independent ECB hikes in 2008 and 2012 were rapidly proven policy mistakes. The BoE’s single 2005 cut was also wrong. Hopes that 2024 is benignly like 1989 may be misplaced.

• The monthly inflation reports have proven to be the catalysts for the repricing of USD rates in recent months and we fear another 1-2 sigma event next week.
• Our calibrated nowcasts have settled on the hottest inflation forecast in town, which will likely prove to be a shocker now that USD duration bets are back in fashion.
• Our nowcasts hint at 0.45% MoM headline inflation and 0.38% MoM core inflation, which is well above consensus at 0.3% MoM for both (see full details in chart 7)The uniformity in the early consensus numbers is striking with right about every analyst on earth expecting a 0.3% MoM print, which has oddly turned into the mechanical monthly forecast every single month.

• The Riksbank reduced the policy rate to 3.75%, motivated by inflation nearing the target amid a weakening economic outlook, with indications of further rate cuts if the favourable inflation outlook persists.
• Based on ongoing economic evaluations, future interest rate decisions will be cautiously managed, with potential additional rate reductions contingent on sustained positive inflation trends and economic stability.
• The central bank remains cautious about inflation risks related to external economic factors and the krona’s volatility, ensuring a responsive and flexible monetary policy to navigate potential economic fluctuations effectively.

• The FSS mentioned it has uncovered 211 billion won of naked short sales by Credit Suisse and 8 other global banks of Korea-listed stocks between 2021 and 2023. 
• The current ban on short selling stocks could be extended to at least 1H 2025. 
• The Korean government’s imposing these large fines on the foreign brokers is sending a message to the foreign brokers to not engage in naked short selling.

• Shipbuilding /Cover Story: U.S. widens China trade fight to shipbuilding which it lost decades ago
• China-France /: Xi looks to cement friendship and enhance trust on France visit
• Hang Seng Index /: Beijing’s show of resolve helps drive Hang Seng on 10-session winning streak, analysts say

• The RBA held the cash rate at 4.35% amid ongoing but moderating inflation, particularly in the services sector, reflecting a cautious approach to ensure inflation returns to the 2-3% target range by the second half of 2025.
• Economic uncertainties, including persistent services inflation, global geopolitical risks, and the effects of previous rate hikes on consumption and economic growth, continue to influence the RBA’s policy decisions.
• The RBA maintains a flexible policy outlook, indicating that future rate adjustments will be data-driven and contingent upon evolving economic conditions and inflation trajectories, with a strong commitment to achieving its inflation target.

• The ‘battle for Labour’s soul’ will be determined by Sir Keir Starmer’s ambition.
• Starmer’s ambition is understated but undoubted.
• The outcome will also be influenced by the Third Way principle that ‘what matters is what works’.

• Philippines CPI inflation in April 2024 was 3.8% y-o-y, lower than the predicted 4.1%, showing a decrease from the previous period.
• The current CPI inflation rate is the highest since December 2023, yet it is 0.72 percentage points below the one-year average, indicating a slower price growth in the economy.
• The inflation rate is also 1.75 percentage points below the long-run average, indicating a significant deviation from the historical trend.