• We slightly reduce risk on a worsening macro outlook. We upgrade European government bonds and investment grade credit, and downgrade Chinese assets. • The Fed raised rates by 0.5% last week – the largest increase since 2000 – and signaled similar rises ahead. Long-term yields shot up and stocks… Read More »
The surge in Euro area inflation—with headline expected to reach 9% in September—has raised the prospect of second-round effects, where increases in wage growth and long-run inflation expectations push up inflation persistently. We explore the risk of such effects by taking a historical look at the effects of oil price… Read More »
Divide and rule policy (Latin: divide et impera), or divide and conquer, in politics and sociology is gaining and maintaining power by breaking up larger concentrations of power into pieces that individually have less power than the one implementing the strategy. Historically, this strategy was used in many different ways… Read More »
·Treasury announced across the curve cuts to nominal auction sizes in its May refunding announcement, surprising against our expectation for more targeted reductions at longer maturities. The broader cuts appear to have been supported in part by stronger-than-expected tax receipts, which imply a lower FY22 deficit than our assumption. ·A… Read More »
BOTTOM LINE: The final Euro area composite PMI for April was unrevised from its flash estimate of 55.8, reflecting a small downward flash-to-final revision in Germany that was offset by upward revisions in France and the periphery. The Italian and Spanish composite PMIs both improved in April, led by a… Read More »
ECB officials have signalled the possibility of a new backstop tool for sovereign debt markets. We think their main objective is to deter a speculative run that could interfere with plans to hike policy rates. But officials have remained deliberately vague regarding the triggers and features of a potential backstop,… Read More »
Emmanuel Macron’s election victory on 24 April supports policy continuity for France (AA, stable) and for European integration, but popular support for his reform agenda is considerably weakened compared to five years ago. Growing popular dissatisfaction with the political status quo is reflected in the highest abstention rate in over… Read More »
– S&P Global Ratings raised its Henry Hub and AECO natural gas price assumptions for the remainder of 2022 and 2023. We raised our Title Transfer Facility (TTF) price assumptions for 2023 and our 2024 long term price assumption. We also raised our Brent and West Texas Intermediate (WTI) oil… Read More »
• We don’t see a wage-price spiral. Companies are actually paying less in labor per unit of output, we find. We think wages can rise more without adding to inflation. • The S&P 500 plunged to new 2022 lows last week. We remain overweight equities in the inflationary backdrop but… Read More »
The decision by Gazprom to halt gas supplies to Poland (A+/Negative) and Bulgaria (BBB+/Stable) after both countries refused to use Russia’s proposed mechanism for gas payments is a significant escalation in the energy stand-off between Russia and the EU. The move also substantially increases risk of further gas-supply disruptions to other EU countries if… Read More »
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