Macro

• We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
• Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
• High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway

• Donald Trump’s victory in the U.S. presidential election ignited a wild frenzy in China’s stock market, propelling shares of certain companies to dizzying heights — not due to any tangible link with his policies, but solely because their names vaguely echoed his.

• In the lead-up to Trump’s re-election, Shenzhen-listed Wise Soft Co. Ltd., a software maker, and Sichuan Development Lomon Group (SDLomon), a fertilizer producer, saw their stock prices soar, repeatedly hitting daily trading limits as investors piled in.

• These were part of a wave of “Trump concept” stocks, heavily touted by influencers and livestreamers doling out online stock tips. The pitch was as peculiar as it was effective: the companies’ names, when spoken in Chinese, bore a resemblance to the phrase “Trump wins.”

• A review of recent events/data impacting our investment themes or outlook
• Revisiting some of our old favourites- China, Japan and Gold
• Short-Term trades continue to work but investors only interested in US equities

• Main point: The current positioning picture is becoming increasingly uniform across asset classes: higher US growth, higher USD rates versus EUR/GBP rates, higher USD vs. peers, and higher US equity returns compared to Europe/Asia.
• The risk/reward of taking the opposite bet is starting to look appetizing.

• We have been looking at the explosive increase in US equity positioning for a while, as multiple indicators show that equities are reaching stretched points positioning-wise — CFTC positioning among asset managers skyrocketing, our own data showing increased positioning in US vs. the rest of the world, and surveys starting to indicate that everyone is expecting equities to crawl higher.

• US election outcome and policy proposals causing challenges for emerging markets in 2025
• Expectations for US exceptionalism and potential insularity affecting global trade and growth
• Potential impacts on inflation, monetary policy, fiscal dynamics, and investment environment for EM fixed income in 2025, with short-term opportunities amidst uncertainties.

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• DXY strength through 1Q25 predicted with positive volatility
• Dollar correlations expected to remain firm, with potential pockets of soft cross correlations
• Systematic FX adoptions models highlight opportunities in FX carry via options, short volume strategy, volume reversal model, and volcurve model for 2025

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• As part of our series of initiations on copper stocks, Lundin Mining (LUN CN) is another play with a cheaper multiple than Southern Copper (SCCO US) but an inferior ROCE.
• With its most recent acquisition of the Jose Maria copper project in a 50:50 JV with BHP, the mid-size copper-producing company is on its way to growth after 2027.
• Trading at 17x FY25e and 5.0x EV-EBITDA, this is another company in our stable worth exploring. 

• Euro area inflation increased by another 0.3pp in November to 2.3% y-o-y. Headline surprises were small and balanced, but the resilience doesn’t fit dovish pricing.
• Core and services price inflation rates were little changed at above-target levels. They will likely rise again in December and stay too high throughout 2025.
• The ECB believes policy is tight and demand is too weak, allowing it to cut again in December. Gradualism is required to avoid over-easing amid ongoing data resilience.

• Inventory lowest in 13th months
• Arbitrage widens for African and Indonesian rubber
• Frontloading resulted in spike in exports

• Euro area inflation and activity data indicate a need for careful ECB easing. The wide pricing of monetary policy divergence is excessively depressing EURUSD. Schnable’s guidance aligns with contrarian pushback.
• The upcoming week’s calendar is relatively quiet before the usual pre-Christmas rush.
• US nonfarm payrolls are the key highlight, with an expected soft rebound that may lead the Fed to cut by 25bp in December.

• Agriculture / In Depth: Warming climate threatens Chinese farmers’ livelihoods After the Mid-Autumn Festival celebrations ended in Huma, a county at the northern reaches of Northeast China’s Heilongjiang province, farmer Xu Xiujian began harvesting his soybean crop.
• He had planted earlier than usual this year, in line with the spring rains, which had come early in mid-April.
• Xu’s case, while seemingly unremarkable on its own, reflects a much larger shift happening in China’s climate and the impact it is having on the country’s agricultural industry.

• The US has ramped up its tariff threats months before Trump even takes office.  The newly appointed trade representative is a China hawk with some questionable policies ideas.
• China has reduced its dependency on US exports by half over the last several years and is better prepared to handle trade negotiations.
• Although previous trade negotiations during Trump’s first term lasted more than a year, most of the tariffs were never imposed. 

• The US has ramped up its tariff threats months before Trump even takes office. The newly appointed trade representative is a China hawk with some questionable policy ideas. 
• China has reduced its dependency on US exports by half over the last several years and is better prepared to handle trade negotiations.
• Although previous trade negotiations during Trump’s first term lasted more than a year, most of the tariffs were never imposed.

• Last week, we missed an intriguing story that several clients have asked us to explore.
• China issued $2 billion worth of USD-denominated bonds, which might not seem groundbreaking at first glance—it’s not uncommon for China to issue bonds in dollars.
• However, two aspects of this issuance stand out:The Venue: These bonds weren’t issued in the typical financial hubs like New York or Shanghai but in Riyadh, Saudi Arabia—a first of its kind.

• JP Morgan’s base case outcome for 2025 euro rate outlook is positive, with a focus on growing euro economy and inflation reaching 2%
• French political uncertainty may cause modest widening in intra-EMU spreads, but overall outlook remains positive
• German swap spreads expected to stay range bound with modest widening bias, driven by technical flows and repo rates

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• AI boom reflected in record fund ownership in ASML Holding NV (ASML NA), NVIDIA Corp and Taiwan Semiconductor (TSMC) (2330 TT).
• The ‘Magnificent 7’ group of stocks have hit a record underweight of -6.83% below the MSCI ACWI index.  They collectively account for 11.2% of the average Global fund.
• Recovery Stocks: The old guard of At&T Inc (T US), International Business Machines (IBM US) and General Electric (GE US) appear to be gathering some support from active Global funds.

• Gloomy PMI data increasingly appear noisy as the equivalent ESI surveys broadly reveal resilient output and employment across sectors and countries.
• Price expectations are also at or above their long-term averages, signalling sticky inflationary pressures rather than any dovish shock to below-target levels.
• The ECB faces a consistent hawkish signal in a mirror of the dovish dataset that pushed it to cut in October. It should resist a 50bp cut in December, supporting EURUSD.

• For the week ending 22/Nov, US crude inventories fell by 1.8m barrels, beating expectations of a 1.3m barrel decrease. However, gasoline and distillate stocks rose more than expected.
• US natural gas inventories fell by 2 Bcf for the week ending 22/Nov, missing analyst expectations of a 4 Bcf decline. Inventories are 7.2% above the 5-year seasonal average.
• Analysts raised their 12-month price targets on Chevron while trimming their targets for Exxon and Occidental. Both JP Morgan and Morgan Stanley reiterated their Overweight ratings on Reliance Industries.

• Insurers / In Depth: China’s insurers prepare to shine a light into their financial black box
• Plastic /: China proposes U.N. plastic pollution treaty ‘respect nations’ circumstances’
• Stocks /: Why Trump’s rise sounded like a sure bet for China’s small-cap stock investors

• We just received the meeting minutes from the November FOMC meeting, which include two important takeaways on liquidity—both of which are positive.
• We have been highlighting for some time that markets are trading close to pain thresholds in USD liquidity (and below them in EUR liquidity).
• The Fed is now acknowledging the need for a “put” on liquidity levels.

• INROAD project prompts Tripura to extend CM’s Rubber Mission
• Nagaland aims to cover 30,000 hectares with rubber by 2030
• Northeast starts getting saplings from its own nurseries

• The recent threats of heavy tariffs on Canada and Mexico appear to be aimed at pressuring those governments to address U.S. concerns regarding immigration and drug enforcement.
• While it’s unlikely these tariffs will materialize, the threat serves as a strong incentive for both countries to take action on closing the border and curbing the flow of fentanyl into the U.S. Trump has effectively imposed a hard deadline of January 20th for these efforts, signaling a stark departure from the Biden administration’s earlier carrot-based approach, which focused on incentivizing Mexico with financial support to manage border issues.
• In contrast, Trump is clearly opting for the stick over the carrot.

• Donald Trump’s re-election breaks global momentum in green policies. The COP29 flop demonstrated the green bubble’s deflation amid a return of much-needed pragmatism.
• The EU and UK face competitive pressure to soften their few plans to lower emissions. For example, mandating synthetic fuel would pivot clear from China’s EV advantage.
• Preserving the non-green capital stock would reverse some stagflationary pressures. Adaptation remains the answer to climate change, even if many don’t want to hear it.

• In our multi theme portfolios (both managed accounts and in the UCITS strategy we run with Toscafund*) one of the longest and most stable positions has been in the I- Shares Robotics and Automation fund (RBOT) since we see this as an enduring long term thematic.
• However, we have just switched it to a different ETF, the L&G fund, ROBO and the reason for writing this is that the reasons for doing it reflect some important conflicts within markets and within ETFs themselves.
• When we invest thematically, we use baskets (currently in the form of ETFs) in order to diversify our stock specific risk.

• Debt / In Depth: China’s multitrillion-dollar salve for local government hidden debt
• Argentina /: Argentinian President’s ‘chainsaw’ economic reforms catch Elon Musk’s eye
• Jobless /: Hong Kong to require unpaid work for jobless welfare recipients

• Asia is cheap relative to the US – trading at less than 40% of US’s P/BV – but that’s because Asia’s ROE has consistently declined relative to US’s.
• Over the next couple of years Asian ROEs are forecast to revive relative to the US’s but all Asian markets are not forecast to participate in this recovery.
• The “ROE Winners” (rising forecast ROEs) are Korea, Taiwan, India, Malaysia. Indonesia to stay flat but solidly higher than Asian average. We are skeptical of HK/China and Thailand’s ROE recovery.

• USA hits record weights of 56.55% but remains a large underweight.  Europe’s big 4 comprise a +6.75% overweight. 
• Taiwan closes in on China & HK as ownership soars to record highs.  Argentina hits fresh highs as Australia, Brazil and Sweden are increasingly avoided.
• Japan exposure falls to record lows of 4.24% and  India overtakes China as the top EM country underweight among Global investors.

• Short term supply shortage 
• US and EU demand uncertain
• Shipping cost spike in short term ahead of Trump’s tariff drive

• The BJP of Indian premier Modi convincingly won the Maharashtra state elections despite losing ground in the state’s parliamentary seats in the June 2025 general election. 
• The Maharashtra result was not a one-off.  The ruling coalition managed to hold its ground against the previously resurgent INDIA opposition bloc in other state contests.    
• Modi and his party have corrected course sufficiently to stem any electoral bleeding, but risks from economic discontent and corruption-related controversies continue to weigh on public support. 

• Happy Monday! This week is relatively quiet on the economic data front, with the main releases being the FOMC meeting minutes from the last meeting, Core PCE, and European inflation data to round off the week.
• The most interesting development this week is how markets are reacting to the appointment of the new Treasury Secretary, Scott Bessent.
• Yields are down, gold is down, and equities are surging higher.

• Livestreaming / Cover Story: Livestreamed stock tips worry regulators as novice investors rush in
• Trade /Analysis: Southeast Asia gained from Trump’s China tariffs
• Supply chains /In Depth: Trump is already shaking up U.S.-China trade

• Cold Front in the US dominates Natgas Prices During next week another cold front will arrive in the upper part of the US.
• The temperature anomaly is quite negative – accordingly, natgas prices are currently on the rise.
• As seasonally remain bearish and these temperature anomalies occur often during the winter months, we’ll keep our eye on short opportunities in the market.

• The Euro’s trend weakness reflects rate differentials that are already stretched, with ECB cut pricing at the extremes erroneously priced for the Fed two months ago.
• Labour market data matter, and not just to the Fed. Unemployment trends are even more hawkish in the Euro area, and the ECB should clarify the policy relevance of this.
• Seasonality also supports a fading of the fundamental consensus story. EURUSD hasn’t fallen into yearend since 2016, and crowded positioning could compound the reversal.

• Copper is central to global infrastructure and the transition to renewable energy.
• Zambia, a key player in the Central African Copperbelt, holds immense promise for copper investors, boasting some of the world’s richest geological assets.
• This white paper explores Zambia’s copper mining landscape, highlighting the interplay of global demand, supply challenges, and Zambia’s evolving mining ecosystem.

• Happy Friday! Every week, we dive deep into macro trends, analyze asset movements, and uncover the best value plays in the world of macro.
• These insights are shared with hedge funds and institutional clients, and today, we’re bringing them directly to you.
• While the macro landscape can be complex, we believe it doesn’t have to be intimidating.

• Trump’s energy policy focused on increasing domestic production and exerting pressure on oil exports to bring down prices
• Forecast for 2025 and 2026 predicts global commodities market growth and potential oil price fluctuations
• OPEC members plan to increase capacity in 2025, leading to a large surplus in the oil market and potentially lower prices in 2026

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• Latex export revenue posts 18% growth YoY during Jan-Sept
• Tire industry can consume 200,000 tons of latex a year at present
• Govt placing a lot of attention on research, downstream foray

• Hope you had a great weekend! Here’s this week’s sneak peek into my thoughts on liquidity trends and how they influence my approach to risk-taking.
• Watching the alt-season unfold from an incredibly wet and windy Copenhagen this weekend has been quite bizarre.
• The weather outside certainly doesn’t bring out my animal spirits, but there’s a certain smell of 2021 in the air in financial markets—especially if central banks decide to print more into this scenario.

• The US oil and gas rig count fell by 1 to 583 for the week ending on 22/Nov, reporting a second consecutive weekly fall.
• For the week ending 15/Nov, US oil production fell to 13.2m bpd from 13.4m bpd. Output was at a record high of 13.5m bpd between 11/Oct through 01/Nov.
• US energy producers added two rigs in Texas and one each in Wyoming and Oklahoma. They cut three rigs in Louisiana and one each in California and Colorado.

• Overweight, Japanese equities and private equity. Underweight JGBs and hedge against yen weakness
• Japanese business cycle indicators remain broadly positive, underpinning continued economic recovery and corporate earnings growth.
• Mortgage are rising, a positive for construction & consumption. However, spending is moderating despite strong nominal wage growth. Consumption rather than exports is the biggest uncertainty to the outlook.

• SGX IO Futures closed USD 3.83/ton higher for the week ending on 22/Nov. It traded in a range of USD 6.90/ton, which was smaller than the prior week.
• Chinese portside inventories increased by 350k tons WoW to 148.86 MT as of 22/Nov. Steel mill inventories rose 13.8% to 15.6 MT in mid-November compared to early November.
• Iron ore prices remain well supported in the near term despite high stockpiles at Chinese ports due to strong consumption and robust steel production ahead of the Lunar New Year.

• Disappointing September/October China lending data with TSF down 9%/24% YoY to 3.7/1.4 trillion RMB Vs. (analysts expectations of 4/1.5 trillion RMB) has led to skepticism about China’s recovery story.
• Copper prices have dropped below 9000 USD/ton and stayed there despite the fall of exchange inventories. 
• We like the LT copper story and see long-term benefits for stocks like Southern Copper (SCCO US), Ivanhoe Mines (IVN CN), and Teck Resources (TECK US). 

• Donald Trump’s approach to fulfilling his commitment to end the Russia/Ukraine war is crucial.
• This approach could directly affect the escalating tensions on the Korean peninsula.
• It could also impact the situation in the Taiwan Strait.

• The past week saw insights on Aspirasi Hidup Indonesia (ACES IJ), Ginebra San Miguel (GSMI PM), DigiPlus Interactive (PLUS PM), Keppel DC REIT and Bangkok Dusit Medical Services (BDMS TB).
• There was also a macro insight on Indonesia’s economy post the recent rate decision and an insight from Daniel Tabbush on Singapore banks as credit growth starts to recover. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• While US equities have already discounted better times under a second Trump administration, the dollar is continuing to appreciate based on better growth expectations, particularly versus the UK and Eurozone.
• After years of excessive regulatory requirements on banks, rumours are abound that the new Trump administration will revoke Basel 3 capital requirements to boost lending to the real economy.
• The Trump administration will face legislative barriers via filibusters. Financial markets will not give the second Trump administration an indefinite carte blanche with respect to any profligate fiscal policy conduct.

• The S&P 500 arrested its decline at its 20 dma and exhibited a bullish reversal and this reversal was confirmed by bullish internals.
• Our base case calls for a rally into year-end. The coming week is the start of the seasonally bullish period to year-end.
• One key risk is option sentiment, is showing signs of froth, though other sentiment indicators remain in neutral territory.

• Looking to 2025, market returns are likely to be more uncertain than in the past. The degree of dispersion in the range of forecasts is wider than usual.
• There will be winners and losers. Deregulation should benefit the energy, AI-related technology, and financials. 
• Losers include bonds, and construction stocks because of their sensitivity to both rising rates and heightened labour costs from deportation.

• The Republican sweep, both in Congress and the White House, seems to have sparked a risk-on attitude across financial markets of late
• But Republican presidencies have coincided more regularly with periods of post-war economic downturns
• And the disparate US equity market performance enveloping presidential cycles is a nagging puzzle   

• Iron ore prices were rangebound and maintained at over 100 USD/ton. In the last four years, they have been in a 95-130 USD/ton range. 
• China TSF (Total Social Financing) disappointed the street with 1.4 trillion RMB (-24% YoY), compared to the street estimates of >1.5 trillion RMB.
• We believe that more significant lending numbers would catalyze the iron ore price, but till then, iron prices will remain stagnant at the 100 USD/ton level. 

• Steep dip of 30.6% in NR exports month-on-month in Sept
• Ivory Coast’s infusion touches an abysmal share of 14.9%
• Rubber glove exports to be worth a record RM13.7 billion in 2024

• Hello everyone, and welcome back to our weekly positioning watch.
• Main Takeaways: The energy bet is starting to look compelling. Oil positioning is fairly bearish, and it seems hedge funds are starting to play the oil trade from the short side after months of avoiding energy altogether.
• The risk asset trade is still on, but positioning is stretched. The Santa rally suggests higher equity prices, but year-end position squaring could disrupt the long equities play.

• Autos / In Depth: How BMW, Audi and Mercedes ended up also-rans in China
• Retail /: Nongfu Spring founder attacks livestream sales model and low-price platforms
• Energy Insider /: Russian gas to power Shanghai by year-end, Beijing reins in solar industry

• For the week ending 15/Nov, US crude inventories rose by 0.5m barrels, exceeding expectations of a 0.4m barrel increase. Gasoline stocks exceeded estimates, while distillates declined less than expected.
• US natural gas inventories fell by 3 Bcf for the week ending 15/Nov, contrasting analyst expectations of a 2 Bcf buildup. Inventories are 6.4% above the 5-year seasonal average.
• TD Cowen raised its PT on Exxon, while Morgan Stanely lowered its PT on Halliburton. Aramco and Sinopec began the construction of a refining and petrochemical complex in China.

• The Euro has weakened over the past week due to markets focusing on hawkish price and wage inflation, with more emphasis on activity growth rates and PMIs than on unemployment and underlying inflationary pressures.
• The Flash HICP for November may not rise as expected due to base effects such as German package holidays, which is considered a temporary blip.
• Despite most data warning against a 50bp cut, the RBNZ is likely to make this cut again, positioning it as an outlier.

• A key medium-term driver of share price is earnings estimate trajectory – in particular, “earnings inflections” – i.e. the trajectory of earnings estimates changing directions. 
• Different Asian markets have had different estimate trajectories. But most suffered estimate cuts since August/September 2024, coinciding with the US Dollar appreciation and the spike in US yields.
• We argue that investors need to watch out for Taiwan, Indonesia, Malaysia and India for earnings estimate increases. India’s could decline in the near term and commence an uptrend later. 

• EM sovereign debt has seen significant changes since the pandemic, but no wave of defaults has occurred
• China’s debt numbers are higher than Europe’s for the first time, impacting the global market
• Sovereign debt restructuring remains a complex and idiosyncratic process, with challenges ahead for debt dynamics and growth in the EM market

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

• Looking at the current polls, there’s no clear path to a functioning coalition in Germany.
• The three potential options are: CDU/CSU pairing with SPD – a move toward stability but lacking excitement; CDU teaming up with the Greens – a less likely scenario given weak polling and major ideological clashes; and finally, the Merz dream coalition of CDU/CSU and FDP, which remains far from reaching the crucial 50% mark.
• With all three options falling short, creativity (or desperation) might be the only way forward.

• The Drill: Could nuclear be the next Trump bet?
• This week’s The Drill examines commodities in the aftermath of Trump’s election, where calm has begun to return as risks were initially overestimated.
• Nuclear energy is likely an underappreciated theme in the new Trump administration, while tariff threats appear overblown.

• Upwards revisions to Euro area labour costs and a jump in negotiated wage settlements extend cost growth inconsistent with a sustainable return to the 2% inflation target.
• The ECB hopes this will subside swiftly in 2025, with productivity growth and squeezed profit margins helping contain inflation. But these hopes seem set to be disappointed.
• Persistent wage pressures should prevent a 50bp rate cut in December and limit further cuts. Less dovish fundamentals feed bullish Euro seasonality, magnified by positioning.

• The investment side in Malaysia over the post COVID years has really taken off.
• In Thailand, private investment contracted (-1.4%), reflecting political and economic challenges driving offshore investments.
• Bangkok has seen little progress in mobility since the mid-1990s.

• Our Geopolitical team is wrapping up an analysis on the escalating Ukraine-Russia conflict.
• In the meantime, here’s a piece we believe markets might not yet be fully tuned into:With Donald Trump and Elon Musk seemingly forming a close alliance, their influence on trade and economic policies has become a hot topic.
• Notably, Vivek Ramaswamy and Musk have thrown their support behind Javier Milei’s economic strategy in Argentina, which includes radical measures such as aggressive spending cuts and a commitment to reducing trade barriers.

• One of the biggest trends impacting the fund flow in Korea this year has been the huge capital inflow into overseas equity ETFs. 
• The net asset value of the listed ETFs in Korea investing in overseas stocks surpassed the ETFs investing in domestic stocks for the first time in 17 years.
• The ETFs that invest in overseas stocks were 35.8 trillion won on 12 November 2024, up 111% from 12 January 2024.

• The tentative green shoots in consumer and business demand seen in the latest data are likely due to one-off factors.  A sustained recovery is still some distance away. 
• The fundamental underpinnings of domestic demand remain shaky, given continued weakness in the labour and property markets and external uncertainties. 
• Moreover, with the trade war likely to be escalated by the next US administration, the Chinese economy may suffer material damage from a more hostile external environment. 

• US natural gas prices rose 5.77% for the week ending 15/Nov, buoyed by forecasts of cooler weather, rising US LNG exports, and declining production.
• Henry Hub Put/Call volume ratio sharply rose to 1.08 from 0.65 (08/Nov) the previous week as put volumes rose by 53.5% WoW, while call volumes fell by 7.0%. 
• Call OI increased for December, January, February, and March expirations, while put OI was substantial for November, April, May, June, and July contracts.

• WTI futures dropped 4.77% for the week ending 15/Nov, pressured by a bleak demand outlook, a rising dollar, and weak economic data from China.
• WTI options Put/Call volume ratio rose to 1.00 from 0.66 (08/Nov) last week, as call volume dropped by 57.3% WoW and put volume fell by 35.4%.  
• WTI OI PCR climbed to 0.86 from 0.77 (08/Nov) last week. Call OI fell by 37.9% WoW, while put OI fell by 29.9%.

• A surprising airfare rebound extended CPI inflation’s energised rise to 2.3%. Its higher weighting in core and services measures compounded the upside surprise there.
• Underlying inflation also strengthened on other measures, like the median, and looks inconsistent with a sustainable return to the inflation target.
• We still expect inflation to trend above the target in 2025 on excessive unit labour cost pressures. The BoE can remain gradual in its easing cycle, skipping a cut in December.

• Rubber Meet spots Risk Center, EUDR, industry academy as priorities
• RAOT delegation holds talks with APROMAC top brass
• Ivory Coast cup lump exports ban to stay, says APROMAC official

• Airspace / China is making sure its low-altitude economy is ready for takeoff China is looking to the skies for future growth as it nurtures its nascent low-altitude economy with efforts to launch pilot programs for new aviation services.
• The National Development and Reform Commission (NDRC), the country’s top economic planner, is to create a Low-Altitude Economy Department to oversee the sector as it takes off, according to Chen Zhijie, director of the State Key Laboratory of Air Traffic Management System and Technology.
• At the same time, the central government is drawing up detailed industry guidelines to establish a regulatory framework for the sector, Chen said at a Monday forum.

• The 2025 budget sends the right signals to the market by reinstating financial discipline.
• However, given the macroeconomic assumptions, the global economic environment, and the limited flexibility in spending, there is little room for deviations.
• The federal government presented the 2025 Economic Package, in which the broadest measure of debt (Public Sector Financial Requirements, RFSP) is planned to decrease from 5.9% of GDP this year to 3.9% in 2025. 

• For the first half of November, we forecast headline inflation at 0.40% bw, below the historical average due to the early discount season of “El Buen Fin”.
• This would bring inflation to 4.59% YoY.
• Our estimate of 0.40% bw is below the historical average of 0.54% bw for this period.