Global Macro


Global inflation still rising

Morgan Stanley with the note. Global headline inflation climbed to 6.7%Y in June vs 6.3%Y in May. Food and energy prices are still main drivers. Global FX depreciation against the US dollar does not help, we analyze the FX pass-through to headline inflation and identify the most-exposed economies. Global inflation is still increasing, and recent


Why the West will beat China

Bloomberg has a very important story for Australia’s battery of China grovellers. It is this: China’s top leadership has grown increasingly frustrated with a years-long failure to develop semiconductors that can replace US circuitry, an embarrassment capped by a flurry of anti-graft probes into top industry officials and the $9 billion rescue of Tsinghua Unigroup.


Dr Doom returns!

My own view is that the US is better positioned this time around but that won’t save us given it blows DXY sky high causing its own crisis everywhere else. As for long-term inflation, the jury is still out for me…


Global PMIs crater

Things to note include: Inventories to new orders ratio is a great leading indicator for profits. Yuk! The great goods deflation bust has begun. But, it has not yet reached employment so central banks will keep tightening. A global DM recession has begun and a trade shock is now coming to EM as destocking takes


Global inflation still climbing

Pandemic inflation has topped and is about to crash. But Ukraine war inflation is still flushing through the system. —————————————————————————————————————————————————– Global headline inflation is still increasing, at 6.3%Y in May vs 6.1%Y in April. Food and energy prices are driving the move. As we show, food and energy are key drivers of long-run inflation expectations


“Whatever it breaks” central banks steer globe into recession

TS Lombard has written a note arguing that the traditional inverse relationship between unemployment and prices – known as the Phillips Curve – has broken down across the world’s economies because authorities have lost control of inflation expectations. This, in turn, means the world’s central banks will adopt a paradigm of “whatever it breaks”, in


Rampant food inflation comes off the boil

According to JP Morgan, there are signs that rampant global food inflation – which has been running at multi-decade highs – is starting to ease, led by agriculture prices. JP Morgan’s model is pointing to “a big move down in consumer food inflation over the next six months”, which “would lower food’s contribution to headline


The dreaded “wage-price” spiral is an historical artifact

TS Lombard has written a note (below) downplaying concerns of a 1970s-style “wage-price” spiral, suggesting it is an historical artifact that won’t be repeated in “the modern, globalized, high-tech economy, where workers and individual firms have much less bargaining power”. I wholeheartedly agree. In Australia’s case, centralised wage fixing was abolished and workers have never


“Financial demand destruction” routs commodity bubble

TS Lombard argues that receding central bank liquidity, coupled with intensifying concerns over a global recession, is behind the routing of commodity markets. ____________________________________________________________________________ Commodities looked like the only game in town earlier this year as investors sought protection from higher inflation. Receding central bank liquidity, coupled with intensifying concerns over a global recession, is


World economy moves from late cycle into recession

Sobering but very clear reading from the latest mid year outlook report by Capital Group, the near $3 trillion funds management firm. President Rob Lovelace has an interesting take on the trajectory of the global economy: We are living through a pivotal time in history, marked by geopolitical realignment, high inflation, volatile financial markets and


Oil price collapses on global recession fears

Oil prices crashed overnight, with Brent down more than 10% from the morning highs on mounting global recession fears. However, Goldman Sachs believes oil’s fundamentals remain sound. ___________________________________________________________________________ Oil prices collapsed today, with Brent down more than 10% from the morning highs. We view this move as driven by growing recession fears in the face


Debunking fertility rate paranoia

A certain type of person loves to obsess over an arbitrary point of “fertility falling below replacement” as if that is the point of no return for population collapse. The world’s richest man is worried that there aren’t enough humans. I’ve noticed that many other people obsess over the idea that birth rates declining is


Russian oil floods EMs

As we keep saying, commodity supply-side adjustments are wildly dynamic and take manifold forms. The current energy shock will work itself through in a few years. In the shorter term, I am of the view that oil will need to fall a lot more than the low-$100s to placate the Fed and recession will do


Recession cracks spread

The Market Ear with more recession cracks. — Winter IS coming Robin Brooks: “Global recession is coming. Longer-term real US interest rates have kept rising and financial conditions have kept tightening, even as recession worries have grown more acute. So the automatic stabilizer for the economy – that real rates stop rising – hasn’t kicked


BOJ won’t break

The last deflationist standing is not going to fall unless something changes. Pantheon has the note. — Japanese CPI inflation was unchanged in May, at 2.5% year-over-year, the second month above the BoJ’s 2% target. We now expect inflation to remain above target for the rest of the year, thanks to the ongoing weakness in


Global PMIs break

A wrap from Goldman. The deflation shock begins. — DM trends: The DM composite flash PMI decreased by -1.8pt in June to 51.9 on a steep deceleration in services (-2.9pt to 52.5) and broad-based moderation in manufacturing (-1.6pt to 52.5). Country-level trends: The manufacturing flash PMI decreased sharply in the US (-4.5pt to 52.4) and


BOJ Brrrrrr

TSLombard this time. I personally think that the Fed will pivot before the BOJ breaks. — BoJ says no. Pressure has been rising on the Bank of Japan to tweak its yield curve control (YCC) policy and abandon the “weak yen is good” rhetoric against a backdrop of soaring DM interest rates and intensifying pressure


Will the BOJ break?

Deutsche is owrried about it: The topic of today’s CoTD is the BoJ who meet on Friday. Nothing much is expected from them but let’s look at the wider context. As of last night, so far in 2022, 10yr yields in the US, Germany, France, the UK and Italy were up +196bps,+193bps, +219bps, +162bps and


Albert Edwards: Hard landing dead ahead

I have been at this point in the credit and economic cycle many times in my career and certain things always seem familiar. First the inversion of the yield curve, which is dismissed as a predictor of recession, despite its reliability. Then slightly later, as the economic data slows decidedly, the chorus of economists claiming


Capital has already won the inflation war

FT Alphaville has published an enlightening article that helps to explain why wages globally have failed to lift amid tight labour markets and low unemployment. Author Robert Lucas concludes that capital has already won the class war over labour, which means that inflation will necessarily subside once supply shocks unwind. In turn, the world’s central