Macro

• The Indian economy’s stellar run has further to go, boosted by impressive improvements in infrastructure, financial inclusion and the ease of doing business.
• Private investment, however, has not played a major role, and a declining FDI share undermines the idea that India will be a big winner from supply chain diversification.
• Major barriers, both in terms of India’s economic foundations and policy direction, need to be overcome if India is to attract the capital formation needed to power further growth.

• Welcome to this week’s Great Game after an eventful week in Geopolitics.
• This week we cover four topics: Iranian President Raisi dies in helicopter crash. Russia begins to make gains in Ukraine. Foiled coup in DR Congo. Israeli government coalition begins to crack
• Iranian President Ebrahim Raisi died in a helicopter crash in Northern Iran on Sunday

• Prime Minister Lawrence Wong enters office with a considerable amount of goodwill, but his in-tray will be full as the city-state enters a riskier global environment. 
• His cabinet reshuffle and early policy signals suggest a cautious policy agenda but which would feature greater support for the left behind.    
• Singapore is likely to continue playing a delicate balancing act between Washington and Beijing in foreign policy, while fortifying economic partnerships with its neighbours.

• Genetic resources / Cover Story: China set to ease controls on genetic resources to plug biotech innovation gap
• Iran /: Xi offers his condolences after lran’s President dies in helicopter crash
• Corruption /: China’s minister of agriculture investigated for corruption

• Pass-through of past rate hikes will continue as households refinance their mortgages. Quoted rates have more than doubled, but monthly payments will only rise by 33-39%.
• Substantial wage increases fully offset the rise over 5yrs, preserving the same share of income servicing debt. Refinancing 2yr loans is painful but a relatively rare experience.
• We are not concerned about the marginal tightening, which will be less in 2024 than in 2023. The debt burden has inflated away, making higher rates sustainably affordable.

• The Chinese equity trends have really been eye-catching over the past weeks and despite US efforts to flare-up the trade war via new tariffs, the trend has just continued.
• The new Chinese efforts to prop up the sentiment in the Real Estate space have so far been successful and it seems like an attempt that is a LOT more serious and sizy than what we have seen so far.
• We are no longer talking about trial balloons or minor twists.

• Let me start by dwelling on the fact that Macro generalists such as myself and Thorsten Slok of Apollo suddenly spend countless hours watching Copper trends.
• It is probably a red flag in itself, but it just seems like these developments are so INCREDIBLY important for global macro- and geopolitics these months.
• We have been all over the Chinese copper story in recent months and also traded it with good luck, but we have admittedly been wrong in our call for a weaker CNY (so far).

• EMEA Momentum: EMEA is experiencing positive momentum across multiple countries, with record investments in the MENA region, strong momentum in Greece, Turkey reversing long-term declines, and Poland nearing new ownership highs.
• Asian Stall: Significant underweight in India suggests caution among investors, China weights remain depressed, Indonesia maintains a strong consensus overweight.  Select ASEAN nations show signs of potential comeback.
• LATAM Overweights: Investor sentiment in LATAM remains bullish, with Brazil and Mexico seeing most funds positioned overweight. Argentina hits new highs in fund ownership driven by strong conviction in MercadoLibre.

• The past week saw insights on Sea Ltd (SE US), Grab (GRAB US), Malaysia Airports Holdings (MAHB MK), Bangkok Dusit Medical Services (BDMS TB), and Great Eastern Holdings (GE SP).
• There were also macro insights on Indonesia, following the country’s recent 1Q2024 GDP from Manu Bhaskaran plus some macro commentary on the Philippines.
• 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.

• 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.
• The Fed will release their meeting minutes Wednesday, and it will be interesting to see whether they address the unfolding re-inflationary commodity bull run.
• The Fed is seemingly too honed in on arguments to cut rates, and have so-far more or less ignored the reflation-story.

• Following our initiation on Mount Gibson Iron (MGX AU) and Kumba Iron Ore (KIO SJ), recently we initiate coverage on Champion Iron (CIA AU), a pure play with Canadian assets.
• Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability. 
• Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty. 

• Fund Managers are Long Commodities and Hate Real Estate Fund managers positioning in commodities and energy was virtually unchanged compared to last month, according to the latest BofA survey.
• Compared to the longer term z-score fund managers remain quite long commodities and slightly short energy.
• While the amount of fund managers that are overweight commodities has risen, it’s still nothing compared to April 2022 – right after Russia invaded Ukraine.

• Patriot raising funds with ASX investors involved
• US ban on Russian enriched uranium imports effective by 2028
• Ten X threatens to cancel existing orders if US utilities don’t secure waivers within 60 days

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• A soft CPI report was just what Commodities needed to take the next leg higher
• Inflation expectations fat tailed. Commodities on the move, but we still need oil. China to export inflation to Europe?
• Despite last week’s dovish inflation print, we are not sure that it is disinflation that we need to be worried about, both in the short- and long term.
• Let’s discuss three reasons for that.

• The UK election campaign, which is expected to be lengthy, has informally begun.
• Labour has initiated this campaign by launching six ‘pledges’.
• The success of these pledges is contingent on an economic growth boost, necessitating immediate action from the incoming government.

• Sweden’s central bank joined Switzerland’s in cutting its policy rate due to falling inflation. The Bank of England and European Central Bank could follow in June, ahead of the Fed.
• Housing has been adversely impacted due to the global monetary tightening cycle, but capitulating to political pressure to ease the pain by prematurely easing policy could undermine central banks’ credibility.
• US political patience towards the Fed’s “higher for longer” policy approach and a stronger dollar could be tested as the presidential election approaches, thereby placing pressure on the Fed. 

• Stock prices have achieved fresh all-time highs and there is nothing more bullish than new highs.
• Stocks are rising because of strong technical positions,  progress on disinflation, and continuing signs of growth.
• These three factors are combining to be supportive of high stock prices ahead.

• Fed’s decision to taper its balance sheet runoff has provided support to long-term treasuries, particularly 10-year notes, signaling a potential rise in demand and a move towards yield curve normalization.
• Recent treasury auction results reflect a divergence in demand across maturities; long-term 10-year treasuries show weaker performance compared to strong showings in shorter 3-year and 5-year maturities.
• Data-Dependent Fed is likely to be influenced by improving economic indicators, supporting a normalization of the yield curve. During normalization, the 10Y-2Y spread is the superior instrument for exposure. 

• US Inflation and Interest Rates: The US CPI for April met expectations, triggering a stock rally, but detailed figures suggest inflation remains high, casting doubt on imminent Fed rate cuts.

• Japan’s Economic Contraction: Japan’s GDP contracted by -2% annualized in Q1, marking the third consecutive quarter without growth, yet interest rate hikes are still expected despite the economic downturn.

• Indonesia’s Steady Growth: Indonesia reported a consistent 5.1% GDP growth for Q1, in line with expectations and historical performance, though the economy remains below its potential growth rate compared to peers like India and the Philippines.

• Wheat prices are experiencing a significant resurgence due to extreme weather events and global supply-demand imbalances. Price is 22% higher over the past month. 
• May WASDE report indicates a positive outlook for global wheat production despite recent weather challenges, suggesting potential underestimations in global supply disruptions. 
• The anticipated shift to La Niña, coupled with historically low stocks-to-use ratios, threatens global wheat supply, heightening the potential for increased market volatility and price spikes.

• The final EA HICP inflation print confirmed the unsurprising stability at 2.4% in the April flash release. Energy price base effects will probably push it higher again in May.
• Underlying inflationary pressures have continued falling, with most statistical measures under 3% y-o-y with monthly impulses at or slightly below the ECB’s target.
• Like the consensus, we expect inflation to stay close to 2%. This outlook and subdued underlying pressures will likely ease the ECB’s decision to start cutting rates in June.

• UK wage data continues to surpass expectations, however, the Bank of England remains unfazed. There are concerns that premature rate cuts could lead to a financial bubble and policy reversal, akin to the situation in 1998. The UK does not benefit from the Euro Area’s disinflationary data.
• The upcoming week will be dominated by monetary policy speeches and rate decisions from the Reserve Bank of New Zealand, Indonesia, Korea, and Chile.
• UK inflation data is the macro highlight of the week, with expectations aligning with the current CPI consensus. The release of Thursday’s flash PMIs is also of significance.

• 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