Macro Pulse

Oiling the wheels

During a week with minimal market-moving data and few central bank announcements, attention in the financial markets has turned towards the oil sector. This shift is primarily due to a significant drop in oil prices, which have reached three-month lows, with Brent crude trading at approximately $80 per barrel. In our charts this week we look at the following factors:
Record-low global supply chain pressures
The recent retreat in global commodity prices
Sticky euro area inflation expectations
Negative FDI flows in China
The weakness of the UK's trade flows with the EU
Weaker credit growth in the US

The Fed, forecasts and finance

Financial market sentiment has improved in recent days, partly thanks to the Fed’s decision this week to leave interest rates on hold. Although this decision was largely expected, recent data from the US as well as from Europe have additionally bolstered the belief that a global tightening cycle may be near its end. In our charts this week we home in on this and other themes. Specifically we examine:
·       The consensus for central bank policy rates
·       The tightening of US financial conditions
·       The BOJ’s monetary policy dilemma
·       Ebbing inflationary pressures in the euro area
·       Mutual fund flows in Asia
·       Credit card activity in Israel

Heating up

Financial markets have been more unsettled over the past few days partly because of an escalation of geopolitical tensions in the Middle East. But this has been exacerbated by a mixed set of company earnings reports from the United States coupled with lingering concerns about the trajectory of bond yields. In our charts this week we offer some insights on these issues with some perspective on:
·       US bond yields
·       Financial market stress
·       Credit conditions in the euro area
·       Unemployment rates in major economies
·       Asia’s portfolio flows
·       Global temperature anomalies

Gauging geopolitical risks

Geopolitical instability in the Middle East has continued to weigh on sentiment over the last few days not least given its potential to amplify financial instability. In our charts this week we look at this and other factors driving the global economic outlook. Specifically we home in on:
·         Geopolitical risk and financial stability
·         Energy prices and stagflation risks
·         China’s data surprises
·         Birth rates in China and Japan
·         The world economy’s growth potential
·         Fiscal policy space

Geopolitics, IMF forecasts and China

The flare up of geopolitical instability in Israel and Gaza has led investors to re-examine the outlook for the world economy over the past few days. But the release of the IMF’s latest World Economic Outlook publication also grabbed some of the financial headlines though whether its staff additionally need to now re-examine that outlook remains to be seen. In our charts this week we take a look at the following:
·         The IMF’s latest forecasts
·         The Blue Chip consensus for 2024
·         The longer-term US consensus for inflation
·         Oil prices and consumer confidence
·         Global current account imbalances
·         China’s capital flows

Unyielding

A further steep climb in US Treasury yields has been in the eye of the storm for financial markets over the past few days. In our charts this week we assess this trend and its driving factors. Specifically we home in on:
·         US yields and the dollar
·         Expectations for the Fed
·         Quantitative tightening policies and real yields
·         Inflation expectations and oil prices
·         Japan’s portfolio flows
·         Emerging market vulnerabilities
 

Trading places

Financial markets have been much more unsettled in recent weeks largely thanks to a “tighter for longer” narrative from the US Fed and a further steep climb in US Treasury yields. In this week’s charts of the week publication we focus on this and other issues including:
·         Slowing world trade growth
·         Ebbing consumer confidence
·         Broad money supply contractions in the euro area
·         US household balance sheets
·         US corporate balance sheets
·         Female labour force participation rates

Higher for Longer

Financial markets have been on the back foot in recent days with some oil-related inflation jitters combined with a “tighter for longer” message from the Fed a couple of contributory factors. In our charts this week, we made a nod to these and other issues with some colour on:
 
·         Firming US Treasury yields
·         Higher consumer energy prices
·         UK financial markets (this year versus last year)
·         Firming JGB yields
·         Foreign exchange reserve in EM economies
·         India’s favourable FDI flows

A troublesome consensus

Following this week’s ECB policy decision, investors will likely remain focused on central banks in the coming days with the Fed, the BoJ and the BoE all due to meet next week. With that in mind, we look at some of the key considerations for these policymakers in our charts this week. Specifically we home in on:
 
·         Quantitative tightening and real yields
·         A mixed global growth consensus for 2024
·         A still-high global inflation consensus for 2024
·         Slowing UK labour market activity
·         The China-induced slowdown in South Korea’s export growth
·         The US dollar and FX reserves

More stormy waters

The world economy’s resilience over the last few months has surprised many forecasters but the incoming data from Europe coupled with a further climb in the price of oil suggest that downside risks are accumulating. In our latest charts of the week publication we dig into this with some perspectives on:
·       Recent global business surveys
·       Credit impulses in the US and euro area
·       Oil prices and inflation surprises
·       Manufacturing capacity pressures and inflation
·       Risk assets and data surprises
·       Productivity and demographics