Global Macro

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Global recession looming fast

Global recession is looming fast as the six shocks come together: European war and energy, Chinese property and OMICRON, and US inflation and rates. Goldman’s global FCI is still tight: And the global current activity indicator is already in recession (which is anything under 2% global growth). Europe and China are leading the way but

3

Global recession gathers pace

Goldman’s nowcasting indexes are all telling the same sorry tale. Global recession is looming fast. The global financial conditions index is off the chart tight: And growth is following in current activity indicators. Remember that anything 2% and below is considered a global recession: Led lower by Russia, China and Europe: And just in case

7

What kind of global recession is coming?

A stonker, in my view. Though I agree it is probably going to be more like the 1970s than 2008. Balance sheets are not in bad shape, except in Chinese SOEs and they can be massaged. Credit Suisse makes a decent fist of arguing that it will more likely be a policy-induced and commodity shock

14

Get set for a stonking global recession

According to Deutsche Bank, it is coming in a little over a year. My personal view is it will arrive sooner, beginning sometime later this year overseas and in 2023 in Australia. My own view is also that it will take fewer rate hikes. At this point, that’s not terribly important. The strong base case

0

Korean trade canary chokes

It’s the best leading indicator for world trade available. Pantheon: Early export data from Korea suggest plunging Chinese demand will weigh heavily on global trade in April. Exports to China grew just 1.8% year-over-year in the first 20 days of April, down from 11.3% in March, even as total 20-day exports accelerated to 16.9% year-over-year,

6

Here comes the global recession

Goldman has some useful charts that capture the moment. Its current activity indexes are crashing Especially for EMs which did their monetary tightening last year: With the US about to tighten financial conditions like you would not believe: Deutsche is going full bear: The storm clouds over the global economy have darkened dramatically. Russia’sinvasion of

24

US and Europe set to economically isolate China

The US and Europe are set to isolate China as Australia allows it to occupy its sphere of influence in the Solomons. The cowards of Canberra are beyond reproach. Nearly two months into the Russia-Ukraine war, US policymakers – troubled by Beijing’s pro Kremlin rhetoric – are forging ahead with robust plans to accelerate US-China

0

Korean global economic canary dies

ROK exports are a key real-time barometer of global trade. It just died. Pantheon with the note. — The BoK pressed ahead with its hiking cycle on Thursday, despite the absence of a governor. Governor Lee’s term has ended, and nominee Rhee Chang-yong has not yet had his confirmation hearing. The 25bp hike, to 1.50%,

2

Time to buy bonds?

So says Jeffries. My own view is that oil has likely peaked for the cycle already as China and India extract Russian oil and sanctions steer clear of energy. If you subscribe to it, my base case of the five shocks of European war and energy, Chinese property and OMICRON,  and US rates driving global

1

Global recession panic rises

Deutsche out front. I agree but the time frame is too long. This cycle has been defined by speed and its end appears no different.  The key is that activity has been severely distorted by an inventory supercycle in the US. Only a minor US shock will be needed to unwind it as a trade

3

Don’t fight the yield curve inversion

It’s always the same. Whenever we’re late cycle and the yield curve inverts indicating a looming recession, bulls come out of the woodwork to describe why this time is different.  Albert Edwards takes them to task: Does the inversion of the US 10y-2y yield curveindicate a recessionis on its way? This is the question everyone

1

Goods to services handoff begins in DMs

Goldman with the note: DM trends: The DM composite flash PMI increased by 1.4pt in March, reflecting an expansion in services (+1.6pt) from further easing of Omicron restrictions. Country-level trends: The manufacturing flash PMI increased in the US (+1.2pt), edged up in Japan (+0.4pt) and Australia (+0.3pt), but declined in the Euro Area (-1.1pt) and

37

What if Ukraine wins the war?

The Atlantic thinks it is: Talk of stalemate obscures the dynamic quality of war. The more you succeed, the more likely you are to succeed; the more you fail, the more likely you are to continue to fail. There is no publicly available evidence of the Russians being able to regroup and resupply on a large

2

Can Europe survive the energy shock?

Can Europe survive the energy shock?. In my view, the answer is “no”. The US is slowing as the Fed hikes and global export markets will be hit leading to Europe following China down. But we can all hope. TD Securities with the note. — A Plan to Wean Europe off Russian Energy The economy

3

How long until the recession then?

Deutsche with the note. Everything about this cycle has been fantastically faster than usual so I expect a global recession to begin in H2, 2022.    — Not every Fed hiking cycle leads to a recession, but all hiking cycles that invert the curve have led to recessions within 1 to 3 years. The problem

21

Moscow becomes Beijing’s bitch

The FT has the story: Russia has asked China for military ​equipment to ​support its invasion of Ukraine, ​according to US officials, sparking concern in ​the White House that Beijing ​may undermine western efforts to help Ukrainian forces defend their country. US officials told the Financial Times that Russia had requested military equipment and other

12

Who’s winning the US/China arms race?

BofA with the Q&A. — Aerospace & Defense: the paradigm has changed, Ron Epstein, Head of US Aerospace & Defense research 1. Ron, you’ve written recently that, because of the Russia/Ukraine war, “the defense paradigm has changed. How has it changed and what does it mean for US defense companies? As we think about the

2

Fuse lit on global recession bomb

My base is that a global recession is coming fast. For some time I have been concerned that the giant US inventory rebuild has way overdone it. Here’s wholesale inventories: This is the result of bogus inflation expectations arising from temporary supply-side disruptions. In other words, over-ordering. It’s not a problem in and of itself.