In today’s briefing:
- Inflation Watch: Why EUR inflation will print below 2% before New Years
- FX Nugget: What Policy Normalization? The BoJ Is as Interventionist as Ever….
- ‘Bidenomics’ Delays Recession, but USD Rebound & Fiscal Reins Are Tipping Points
- Real Estate Watch: Too Early to Call off the Crisis in Western Markets
- Ascending El Niño and Its Impact on Corn Production and Prices
- Developing Asia’s Improving Fundamentals Will Further Attract FDI
- Great Game: Will F16s destroy Russia? Will BRICS destroy the USD?
- China’s Economic Woes Will Prompt a Ramp-Up of Measures
- CX Daily: China’s ‘Hidden Debt’ of Local Governments Threatens National Economy
- The Energy Cable #34 – Double top…now what?
Inflation Watch: Why EUR inflation will print below 2% before New Years
- It’s Jackson Hole week and even if Wyoming is typically only full of cowboys (also when CBs gather), they are joined by a cowgirl from France this week for the conference.
- The Fed and the ECB will enter the yearly conference with different macroeconomic backdrops as the US growth and inflation momentum seems stickier than Euro peers on our models.
- And using leads/lags from the European PPI basket and the US HICP index, we intend on showing you that sub 2% inflation in Europe is a clear possibility in just 3 months from now.
FX Nugget: What Policy Normalization? The BoJ Is as Interventionist as Ever….
- Markets are stuck in a discussion on the JPY this morning as BoJ governor Ueda and PM Kishida held a meeting allegedly discussing FX developments.
- Our models continue to signal weakness ahead for the JPY.
- Even a move to 1% in the YCC-curve control has NOT allowed the BoJ to become less interventionist.
‘Bidenomics’ Delays Recession, but USD Rebound & Fiscal Reins Are Tipping Points
- ‘Bidenomics’ investment subsidies aided the 7.7%QoQsaar growth in business investment in Q2CY23, delaying the onset of recession. Policy rate to stay near 5.5% until Q2CY24, thereby restraining growth until then.
- ECB and BoE face less pressure to raise rates amid easing headline inflation, so yield differentials will strengthen USD; the latter will be a drag on net exports in H2CY23.
- The spending restraints agreed in May’23 kick in from Oct’23, and will be a drag on aggregate demand from Q4CY23, the quarter a mild recession is likely to begin.
Real Estate Watch: Too Early to Call off the Crisis in Western Markets
- These past few weeks have been all about China and China is all about real estate.
- With that, welcome to this week’s real estate-focused edition of the ‘Watch Series’, where we look for clues on the state of the US parallel in particular.
- Our findings in brief: Favorable fixings counter forced selling, Record low affordability discourages buying, Little volume and stalemate in price, Weakening labor market and layoffs remain THE triggers for potential selloff.
Ascending El Niño and Its Impact on Corn Production and Prices
- El Niño & Southern Oscillation (ENSO) is a recurring climate phenomenon with adverse impact chiefly on agriculture causing volatility in grain production leading to price shocks.
- Shortening frequency of ENSO cycles and its intensity has increased due to global warming. Given its potency of causing shocks, ENSO now has an outsized influence on global economics.
- Considering El Niño’s impact on corn, expect production to decline next year as La Niña effects fade compounded by agri productivity declines due to higher temperatures & extreme weather.
Developing Asia’s Improving Fundamentals Will Further Attract FDI
- Southeast Asia could regain the position it had in the early 1990s as a premier FDI destination. There are positive signs in a range of new-economy sectors.
- The region’s reforms will help overcome challenges in absorbing FDI caused by infrastructure and other deficiencies.
- The evolving investment landscape thus favours Southeast Asia and other emerging Asian economies. But further reforms are needed to rectify historical weaknesses and establish a lasting appeal.
Great Game: Will F16s destroy Russia? Will BRICS destroy the USD?
- Welcome to this week’s Great Game which will focus on two hot current topics and how to understand them – first the F16 donations to Ukraine and then the BRICS meeting in South Africa.
- First of all, let’s try to unwrap the latest European gift to Ukraine:The F16s are no gamechanger in current numbersAs mentioned several times in this space, the Ukranian summer offensive has halted mainly due to a lack of air superiority.
- It’s simply too hard to break through heavily fortified Russian positions without air bombardment and close air support.
China’s Economic Woes Will Prompt a Ramp-Up of Measures
- China’s faltering economy suggests that its cautious approach has not worked. A vicious cycle is emerging: economic weakness exacerbates real estate challenges, triggering financial stresses that further impact the economy.
- Most concerning is the property crisis, with its impact on developers, homeowners, and local governments: contagion effects could lead to unprecedented defaults on bonds held by local government financing vehicles.
- The larger set of still carefully calibrated actions that are being planned, while helping to preserve minimal growth, will not suffice for China to regain its previous dynamism.
CX Daily: China’s ‘Hidden Debt’ of Local Governments Threatens National Economy
- Debt /Cover Story: China’s ‘hidden debt’ of local governments threatens national economy
- Property /: Country Garden’s plan to extend bond repayment meets with resistance
- Stocks /: China’s securities regulator steps up efforts to bolster sagging market
The Energy Cable #34 – Double top…now what?
- Are we starting to see the early signs of a 2022 dynamic in LNG?
- The below chart describes the scenario we saw late summer last year here in Europe when policymakers all the sudden scrambled to secure natural gas.
- For the cycle to truly have the chance of playing out we need natural gas demand to increase and the USD to strengthen as a product of the increase in demand.
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