In today’s briefing:
- Inflation Watch: 10 Reasons Why No One Will Talk Inflation in 6 Months from Now
- Macro Strategy – Slow Walking into a Recessionary Credit Crunch
- South Korea’s Economic and Geopolitical Risks Pose Strategic Quandary
- China’s Economy Remains Fragile Despite Headline Recovery
- Australian Dollar
- Will North Korea Spring a Nasty Surprise?
- Between Chilean Copper Woes & Brazilian Sugar Rush
Inflation Watch: 10 Reasons Why No One Will Talk Inflation in 6 Months from Now
- All major forward looking indicators point to disinflation in coming quarters
- Even sticky prices now seem to be fading in various indicators
- No one will talk inflation in six months from now
Macro Strategy – Slow Walking into a Recessionary Credit Crunch
- The weakest 2-week change in bank lending on record over the course of March
- Banks take extremely conservative decisions on the back of SVB
- If bank lending continues to contract, Real Estate will be the first victim
South Korea’s Economic and Geopolitical Risks Pose Strategic Quandary
- The sluggish semiconductors market will weigh against the cyclical outlook via manufacturing activity and exports. China’s reopening in trade and tourism is unlikely to compensate.
- The severe population headwinds are caused by entrenched and interlinked factors including labour market rigidities, costs of household formation, and cultural legacies.
- Geopolitical tensions also pose questions for South Korea’s export-driven model of industrialization. Other Asian markets wishing to emulate this path should be cautious.
China’s Economy Remains Fragile Despite Headline Recovery
- The central bank’s depositors’ survey shows signs of recovery in sentiment, but household behaviour still leans towards rebuilding financial buffers and precautionary savings.
- Exporters are also facing difficulties, spurring policy support. A nascent recovery in the property sector, although this needs to be spread geographically for a significant upside.
- These pockets of fragility mean that spillovers from China’s re-opening may be less than hoped, although outbound tourism remains a bright spot given pent-up demand.
Australian Dollar
- The Australian Dollar is at a medium and long-term inflexion point.
- The first question it raises is, does the Australian Dollar holds support and makes a sustainable rally or take the next major leg down?
- Secondly, is it a cause or an effect of weakening Global Demand for industrial commodities?
Will North Korea Spring a Nasty Surprise?
- The chances of destabilizing actions emanating from Pyongyang have increased due to changes in domestic and external dynamics in the regime’s decision-making.
- Pyongyang’s history of calibrated but high-risk provocations points to the regime trying to pressure the US to recognize the regime and nuclear power, bypassing Seoul.
- A series of weapons tests and demonstrations, a severance of communications, and domestic troubles mean that the risk of foreign adventurism has risen.
Between Chilean Copper Woes & Brazilian Sugar Rush
- As the new season commences in April, Brazil is predicted to manufacture 40.3 million tonnes of sugar, marking the second highest yield ever recorded.
- This is primarily due to the favorable climate conditions and the sufficient capitalization of mills, allowing for the proper care of crops.
- As per a report by Job Economia, mills are likely to concentrate on sugar production, reducing ethanol production, since the cost of sugar futures is at its highest in over six years.
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