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US inflation worries prove unfounded

After a solid reading of 0.35% m-o-m in January – which scared some market participants – core consumer price inflation (CPI) proved tamer in February and again in March, posting a more moderate 0.18% m-o-m gain in both months. (That is not too far from the average since 2010 of 0.15% m-o-m). Due to base […]

House View, April 2018

Asset Allocation While macroeconomic and corporate fundamentals still favour risk assets, challenges have been steadily increasing and a lot of good news is already priced into valuations. We sold part of our equity overweight during the early March rally. Even though we have become more prudent about equities’ short-term prospects, we expect to be able […]

US-China trade tensions could last a while

Following on from President Trump’s announcement of a 25% tariff on USD50bn of unspecified imports from China, the US Trade Representative (USTR) last week detailed the list of China-made goods that will be targeted. China reacted swiftly by detailing its own list of counter-tariffs on USD50bn worth of imports from the US. Trump then escalated […]

Federal Reserve’s tightening still on track

Among the many questions posed by the recent more aggressive trade rhetoric from the Trump Administration is whether it will ‘scare’ Federal Reserve officials, and therefore interrupt the current US tightening cycle. But recent comments from Fed policymakers, including from Chair Jerome Powell, suggest that officials remain cool-headed about recent Trump rhetoric. Powell has insisted […]

Europe has a lot to lose from trade wars

Any estimate of the economic costs of protectionist measures, let alone trade wars, is subject to uncertainty given the complexity of global supply chains. A common assumption is that new tariffs on exports will produce small direct effects on GDP growth but more significant indirect effects in the event of escalating trade conflicts, including on […]

The Brazilian real and Russian rouble are still the most attractive EM currencies

Our Emerging Market (EM) FX scorecard, designed to assess the attractiveness of a given currency over the coming 12 months, ranks 10 EM currencies according to key criteria such as growth and vulnerability to external shocks. There have been few changes over the past month. EM currencies have been resilient thus far in 2018, despite […]

US chart of the week – Benefits vs wages

The next US monthly employment report (published this Friday) will once again be scrutinised for signs that wage growth is on the rise. While wage growth has been improving in recent years, the pace has remained glacial. Average hourly earnings were up 2.6% y-o-y in February, a relatively subdued pace when taking into account near […]

US PCE inflation – Still moderate

February core PCE inflation rose 0.23% m-o-m, in line with expectations. The y-o-y reading was up to 1.6% from 1.5% in January. The improvement in US core inflation remains quite unspectacular when taking into account full employment and solid underlying growth (likely to reach 3% this year). Core inflation should rise to 2% y-o-y in […]

Larger-than-expected reduction in French public deficit

France’s public deficit fell to 2.6% of GDP in 2017 according to INSEE’s preliminary assessment, down from 3.4% in 2016 and below the 3% threshold for the first time since 2007. The outcome was better than the government’s estimate of a 2.9% deficit. If confirmed, France will exit the Excessive Deficit Procedure that the European […]

The US’s Chinese phone addiction

For decades US trade policy’s biggest focus was on the country’s astronomical imports of oil. But the oil bill has moderated significantly in recent years, due to the domestic shale oil production boom and the (associated) drop in global oil prices. Lately, and more particularly since Donald Trump arrived in the White House, the focus […]

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