Daily Macro: Much Ado About Credit and more

In this briefing:

1. Much Ado About Credit
2. Ten Years On – Asia’s Time Is Coming, Don’t Miss The Boat
3. UK Preview: Disinflationary Date for Dec-18

1. Much Ado About Credit

• Global financing conditions could tighten further
• Credit demand is deteriorating; credit risks are rising; Eurodollar costs are edging higher
• A de-escalation in trade tensions and a Fed pause could ease the pain
• Will Fed recently turning more dovish (possible shift to slower QT & Fed rate cut in 2019?) + concomitant USD drift provide sufficient respite to put a floor under risk assets?

2. Ten Years On – Asia’s Time Is Coming, Don’t Miss The Boat

We noted in   Ten Years On – Asia Outperforms Advanced Economies Asia’s economies and companies have outperformed advanced country peers in the ten years to 2017.  Growing by 6.8%, real, through the crisis the region is 188% larger in US dollar terms while US dollar per capita incomes 170% higher compared with 2007. In this note we argue even though Asian stock markets have underperformed since 2010 and the bulk of global capital flows have gone to advanced countries, Asia’s time is coming. Valuations are cheap. Growth fundamentals strong. There are few external or internal imbalances. Macroeconomic management has been better than in advanced economies and the scope to ease policy to ward off headwinds in 2019 is greater. China has already started.

3. UK Preview: Disinflationary Date for Dec-18

• UK inflation has tended to disappoint expectations, and another 0.1pp downside surprise looks likely in the Dec-18 data. I forecast CPI inflation to slow by 0.3pp to 2.0% and for a 40bp loss in RPI inflation to 2.8% (index print at 285.8).
• The ONS is likely to use 11 Dec for its index day, which would mean it is using cheaper seasonal travel dates in its airfares survey. The Consensus tends to miss this effect and be surprised by it. My proprietary food price data were soft too.