Inflation/Deflation
China is facing a risk of deflation. Marginal interest rate cuts and targeted stimulus will be insufficient to boost China’s growth given the current deflationary mindset and the danger is that the economy may be entering a liquidity trap. Deflation is bullish for government bonds, but negative for equity prices. Chinese share prices will continue to decline.
According to BCA Research’s European Investment Strategy service Eurozone inflation likely to diminish further. First, policy is tight. The impact on leading economic variables is already visible, with M1 collapsing, credit demand plunging, credit…
Preliminary results of the University of Michigan Consumer Sentiment survey sent a positive signal about household morale in June. The Sentiment index rose by a greater-than-anticipated 4.7 points to 63.9 on the back of improvements in both the Current…
The Eurozone just experienced two consecutive quarters of GDP contraction. For the remainder of the year, can growth pick up or will the ECB decimate activity?
According to BCA Research’s Counterpoint service, making inflation imperceptible will require making unemployment perceptible, meaning a recession. Our non-linear world often surprises our linear-thinking minds. For linear thinkers, inflation falling from…
As expected, the European Central Bank (ECB) delivered a 25bps rate hike on Thursday, raising the policy rate to 3.5% — the highest since August 2001. Moreover, the central bank maintained a hawkish bias, signaling that further rate hikes are likely in…
China’s economic data releases for May fell below consensus estimates. The 7.2% y/y contraction in property investment in the first five months of the year was worse than the expected 6.7% decline. The deceleration in retail sales growth from 18.4% y/y to…
This Strategy Insight discusses the bond market and currency implications of the Fed’s “hawkish pause”.
The US May PPI report indicates that pipeline inflationary pressures are cooling. Headline PPI inflation fell from 2.3% y/y to 1.1% y/y – below expectations of 1.5% y/y and the lowest since December 2020. PPI for final demand was also lower than anticipated…
UK gilts have sold off sharply over the past month, particularly at the short end of the yield curve. The two-year yield has risen by over 100bps since mid-May, while 10-year yields have increased by just over 70bps – causing the 2-year/10-year yield curve to…