July, 06 2017 by lsr team

Grace Fan, Director Brazil/Latin America Research talks about the two main challenges facing Brazil. - Fiscal vulnerability is rising as the reform agenda has been derailed - Political chaos as President Temer has now become embroiled in Lava Jato corruption scandal. 

June, 16 2017 by lsr team

Steve Blitz, Chief US Economist talks about how:
-  Inflation eludes Yellen yet again, nevertheless she continues to chase it
-  But core inflation down means Fed funds rate now normal – inflation is for 2018
-  2017 outlook has changed: balance sheet reduction in Sept, no rate hike until Dec

June, 09 2017 by lsr team

Christopher Granville comments on UK election results:
- Minority Conservative government potentially bullish for economy
- Short-term Brexit process risks stem from political weakness
- Growth – now right on potential – to slow to 1%, recession risk is low

June, 02 2017 by lsr team

Ken Wattret, Chief European Economist, talks about our latest Europe Watch publication Economics: ECB meeting – what to expect 
- Upbeat on growth, cautious on core inflation; financial conditions a concern
-  Easing bias  should go but probably stays for now; exit discussion more likely Politics: Italian elections draw near; May’s wobbles 
-  A risky autumn election in Italy is looking more likely
-  PM May still in pole position but weakened by a poor campaign Markets: Dancing round the May pol...

May, 30 2017 by lsr team

Christopher Granville explains why there needs to be a Brexit Plan B.
Highlights:
- UK Brexit negotiation process creates economic risk
- The UK government may or may not be able to deliver ‘Plan A’
- Businesses need a credible Plan B before the end of 2017
- Failure to set out the alternative will see investment collapse

May, 19 2017 by lsr team

Charles Dumas, Chief Economist at TS Lombard.
Highlights:
- Dollar near past real highs – could relapse later this year
- Pound and yen both undervalued – likely to stay that way
- China’s yuan overvalued – no major move till autumn congress
- Euro still undervalued – may rise sharply when ECB tightens
- Current account balances now matter – yen safe haven in 2018
- China’s debt soaring but not yet dangerous – growth to slow
- Japan’s high debt rising inexorably &nd...

May, 04 2017 by lsr team

China remains the key country as far as future gas demand growth is concerned. However, countries such as India and Pakistan as well as South East Asia are emerging as other major sources of demand. With global gas markets changing and becoming increasingly liberalized, LNG is set to dominate supplies into the Asian market.

April, 12 2017 by lsr team

Jonathan Fenby, Managing Director, European Political Research, and Ken Wattret, Managing Director, Global Macro, discuss and answer your questions on this issue including:
- The probable result and the market reaction to either a Le Pen or Macron victory
- The economic outlook in either outcome
- The reform agenda needed to improve growth and encourage investors
- The reform that each candidate would be able to deliver
- Why both Macron and Le Pen would both have difficulty leading the French government
- How investors should posit...

April, 07 2017 by lsr team

The Fed surprised markets and commentators, including us, as the FOMC minutes showed plans to shrink the balance sheet beginning in 2017. Steve Blitz says this is significant because:
 
•       Signalling shrinkage of its balance sheet shows Fed planning for three increases
•       Fed’s intention is also to present a smaller target to its critics

March, 24 2017 by lsr team

We believe investors have stopped worrying about secular stagnation but are convinced the ‘new neutral’ will keep bond yields at very low levels. While the global economy looks structurally deflationary, there is still a cycle in inflation and interest rates. And the major economies may not be as rate sensitive as everyone assumes.

March, 17 2017 by lsr team

- Chair Yellen dampens market’s policy trajectory - she has to, we don’t
- February retail sales weakened by tax refund delays; underlying demand strong
- CPI details indicate a change - rising prices for discretionary goods

March, 09 2017 by lsr team

Xi Jinping promised in November 2015, that the economy would grow at 6.5% through to 2020. This was necessary, he said, to fulfill a promise by his predecessor, Hu Jintao, to double the 2010 GDP and per capita income by the end of the decade. However, over the past year, there have been several signs that Xi might be willing to back away from this pledge. After recent conversations in Beijing, we believe:
• Policymakers will accept growth below 6.5% from next year. 
• The change responds to a wide-scale recognition that the current rapid pace of...

March, 01 2017 by lsr team

Dario Perkins on: • Markets are now more realistic on President Trump
• US tax agenda more important than fiscal 
• Stimulus will come late in the business cycle
• No likely improvement in productivity and medium-term growth
• Border adjustment tax unlikely to happen

February, 24 2017 by lsr team

Jonathan Fenby sets out 12 reasons why China feels good: 1. China’s economy is ticking over on a cyclical reflation path with sharp PPI recovery coming through.
2. Though it will get worse in absolute terms, the debt problem has been diffused for now by shifting it away from banks and local governments.
3. Currency outflows have moderated for the time being. The housing sector is heading for a correction not a meltdown.
4. Preparations for the Communist Party Congress in late 2017 seem to be on track with no challenge to Xi as he moves into his...

February, 10 2017 by lsr team

- Trade dispute with US to peak in 12 months - Trump deal could be 45% tariff on "non-essential" goods - Chinese trade surplus to fall from 2018 - RMB policy will be undermined - FDI will decline and then retreat

February, 03 2017 by lsr team

Dario Perkins answers your questions on Trump policy:

- How far are markets underestimating President Trump's protectionsit tendencies?
- Is America really getting a bad trade deal?
- What are the Trump trade scenarios?
- How relevant is the 1930s experience?
- How would a possible trade war be different now?
- How might China respond?
- If major RMB devaluation what impact on the US & the global economy?

January, 27 2017 by lsr team

Successful renegotiation of NAFTA is likely but will not provide the template for the US administration’s future China policies. - US-Mexican trade is dominated by global value chains. US-sourced content in Mexican exports to the US is 40% so it is impossible for Trump to realize his threats to impose border taxes on Mexico without causing major damage to US manufacturing jobs. - This makes a successful renegotiation of NAFTA both possible and probable. - But the same cannot be said about US-China trade, which lacks such well-developed channels for trade. As...

January, 27 2017 by lsr team

The hangover from the fiscal and monetary excesses of the last 40 years is adding to the depressing effects of deglobalisation.   Oxford Dictionaries has declared post-truth to be its word of the year. It’s an adjective “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. In 2016, its use increased by about 2,000% over 2015 because it perfectly describes the perceptual changes that are seeping into the global political economy. The first chang...

January, 23 2017 by lsr team

Questions: 1) Last October you noted that Sterling(£) was getting oversold and that the market was overly concerned with respect to the UK’s external balances. 2) Currently on a real effective exchange rate basis how cheap is Sterling(£)? 3) You also highlighted previously that within an overall negative view on sovereign bonds(ex EM high yielders), gilts might be particularly vulnerable? 4) So one of our key macro trades remains short gilts/long US Treasuries? 5) Last week before PM May’s speech you suggested that whatever its content...

January, 20 2017 by lsr team

- Germany & EA both growing above-potential, inflation rising
- Less inordinate ECB stimulus to be announced this summer
- Rising euro vs. dollar later in 2017 to put pressure on Italy
- Germany to accept fiscal union, or Italexit a risk in 2018-19
- Ultra-cheap euro, huge trade surplus: a cause of Brexit-Trump
- World impatient with prolonged resolution of new euro-crisis
- German domestic imbalances could shrink over 10-15 years
- Baby boomers retire – saving down. Immigration raises capex

December, 21 2016 by lsr team

Highlights
- EMs to benefit from US and Chinese reflation in 2017
- But global macro ‘push’ factors set to recede thereafter
- Mature US recovery at risk from tighter monetary conditions
- Beijing’s debt-RMB dilemma pressing as the mini-cycle turns
- Global search for yield to persist, albeit tempered
- Lift-off growth phase elusive for North Asia’s exporters
- Clogged rate and FX channels leave fiscal stimulus option

December, 02 2016 by lsr team

Highlights: - 50% of S&P stocks gain from inflation, 20% lose
- Financials are the main winners 
- Consumer discretionary and Healthcare also benefit 
- Real Estate the big loser    

November, 18 2016 by lsr team

Trump's policies are clearly inspired by Ronald Reagan in the 1980s. Reagan introduced substantial tax cuts and trickle-down economics, but Reaganomics conflicts with Trump's desire to close the US trade deficit.

October, 28 2016 by lsr team

The PBoC’s trade-weighted RMB basket has weakened by a little over 8% since its launch last December. The drop has been orderly, in line with Beijing’s intentions. However, the low-hanging fruit from RMB depreciation has already been picked. Despite successively weaker CNY fixings against the dollar, the RMB basket has failed to decline since late August and this month it has been creeping higher. What is causing this divergence? Is it sustainable, and what does it mean for Beijing’s policy choices?

October, 21 2016 by lsr team

Some claim a US recession is ‘overdue’, but leading indicators are edging higher and we are not seeing the macro imbalances typically associated with major downturns. Rising bond yields and a correction in equity markets provide the clearest 2017 threats, while corporate indebtedness could compound these risks.