In today’s briefing:
- China 13th National People Congress Government Work Report: A Fiscal-Led Recovery in 2022
- CX Daily: The Reshaping of the World as Ukraine War Rages On
- Market Snapshot, Theatre of War
- The Bears are Knocking at The Door
- EM Rates Detach from the US Amid Russian Contagion
China 13th National People Congress Government Work Report: A Fiscal-Led Recovery in 2022
- The government has set an ambitious target for GDP growth given the recent deterioration in the external environment – fiscal policy will turn significantly expansionary to drive the needed recovery.
- More fundamentally, the challenging macro backdrop has compelled policymakers to make greater efforts to tackle key constraints to growth.
- However, we envisage an uneven recovery, with real estate remaining in low gear and private consumption staying weak. This will cap the extent of recovery in domestic demand.
CX Daily: The Reshaping of the World as Ukraine War Rages On
Cover Story: The reshaping of the world as Ukraine war rages on
China willing to mediate in Ukraine crisis, foreign minister says
Roundup: What the government work report told us about China’s 2022 economic plans
Market Snapshot, Theatre of War
- Russian invasion of Ukraine on 24 Feb has generated much uncertainty and financial market volatility, including in FX markets.
- Some asset prices have moved broadly as “expected”, with Rouble, Euro and global equities down and Dollar, gold and fossil fuel prices up.
- But other asset prices have been range bound in past fortnight, including S&P 500, Treasury yields and a number of Asian currencies, or held their own (AUD and NZD).
The Bears are Knocking at The Door
- We are at important global macro crossroads: Central Banks are trying to remove accommodation from markets to tame inflationary pressures right at a point when the impulse of global growth has lost momentum
- Over the last few weeks, bond yields have dropped and yield curves continued to flatten across the board
- But the most interesting moves are visible once you decompose nominal yields into inflation break-evens and real yields, and focus on forward looking metrics and probability distributions
EM Rates Detach from the US Amid Russian Contagion
- US rates are trapped between inflationary pressures on one hand, and risk aversion and growth uncertainty on the other, with the latter dominating for now.
- The previous strong correlation of EM rates with the US has now flipped as they continue to rise even with US rates rallying.
- The spread of EM rates to the US is at its widest in a decade but it should remain that way as long as rates volatility remains high.
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