A detailed analysis identifying the trends that matter, incorporating the dynamics of political risk, the business cycle and other proprietary indicators.
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Economics ResearchEconomics Products: Economics Monthly, Economics Weekly, Newsflow Monitor, Logistics.
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• USD-denominated credit has grown rapidly over the last decade
• This has left the global economy more sensitive to US monetary policy
• Fed tightening and a strong dollar have crimped credit outside the US
• The Fed might need to steepen the curve and weaken the dollar
• Currency manipulator move suggests the US is looking to escalate the trade war
• China could lean on corporate and consumer sector, though the latter is risky
• Capital account protectionism looks like the high-risk, high-impact option
• Brazil joined other EMs by cutting its policy rate last week
• Domestic factors suggest the Selic target rate should be cut to less than 5.5%
• But global financial conditions would need to remain easy for the BCB to get there
Key Message: Global Corporate Earnings Newsflow was the main mover in July, falling to 60.7 from 63.4. That figure is flattered by strong US data; Outside the US we are seeing much weaker Earnings Newsflow, which in some cases has fallen below 2015/16 levels (e.g. Japan, E’zone, China).
• The ASR/WSJ Global Composite Newsflow Indicator (CNI) fell to 48.7 in July from 49.4. Readings below 50 typically coincide with weakness in the JP Morgan Global Manufacturing PMI and bonds returns beating stocks returns.
• Europe faces three long-term challenges
• China, policy coordination & demographics could weigh on the region…
• …forcing it to be more economically protective and fiscally active
• Environmental politics may challenge nationalist populism
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