Daily Brief Macro: EM Fixed Income: Emerging Markets Outlook & Strategy for February and more

• The global backdrop for the start of the year is better than anticipated, with a broad-based upturn in PMIs suggesting steady or even growing global and emerging market growth.
• The US is experiencing some slowing in growth, but consumer demand is more solid, supported by strong labor markets and falling inflation.
• China’s GDP growth is expected to remain around 5.5% in the near term, but there are concerns about ongoing deflation, housing market weakness, and its impact on corporate revenues and private sector confidence. Outside of China, emerging markets in Asia and Latin America are seeing growth rebound, driven by improvements in consumer and industrial sectors.

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• Hello Everybody and welcome back for our weekly 5 Things We Watch!
• We dare say we have a diversified edition this week touching on everything from Japan to Gaza and New York Community Bank! Without further ado lets dive right into it!
• This week’s 5 topics we follow closely:
  • UK CPI
  • Gaza ceasefire
  • US CPI
  • The USD rally and the JPY
  • Banking crisis 2.0?

• Technical Indicators and Sentiment Point to Potential Risks Amidst Strong Fundamentals
• John Templeton famously stated, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.
• ” While India’s economic prospects remain strong, several technical indicators and market sentiment suggest potential exuberance in the benchmark indices.

• UK CPI inflation remained at 4% in January, undershooting expectations for an increase. However, this was primarily because of weighting changes to airfares and energy.
• The median inflationary impulse was marginally above our forecast, and the RPI, which wasn’t reweighted in January, was only 0.1pp lower than we expected.
• If sustained, these weighting changes will have an upward effect on CPI inflation later this year. So, we do not see the surprise’s reason nor cumulative effect as dovish.

• LATAM allocations hit 10-year highs in active Global equity funds.
• Notable increases in allocations include Ninety One Global Value (up 7.5%) and Ranmore Global Equity (up 6.7%), with smaller contributions from Lazard, Delaware, and JOHCM
• MercadoLibre is the driving force behind the moves higher, and remains the conviction holding in the region.