Macro Pulse

·         The global business cycle

·         Copper prices

·         Semiconductor trade

·         Monetary policy transmission

·         US fiscal policy support

·         Euro area financial balances

Investors have grown increasingly cautious about the economic outlook in recent days, partly thanks to heightened geopolitical instability in the Middle East. That Fed Chair Powell has also expressed greater concern about the US inflation outlook has not helped, not least as higher oil prices (and the resilience of the US economy) had already been unsettling investors’ inflation expectations. In our charts this week we focus on:

·       The IMF’s latest economic forecasts

·       Geopolitical risk and oil prices

·       Global oil reserves

·       US Treasury yields versus oil prices

·       US financial conditions and economic growth

·       China’s economic growth in Q1

This week’s stronger-than-expected US inflation data have further dampened hopes that the Fed would swiftly lower interest rates in coming months. And this has led to increased anxiety about the outlook for the US and broader world economy. In our charts this week we home in on:

·         The global growth consensus

·         The global inflation consensus

·         Energy prices and US inflation surprises

·         Oil prices and global growth surprises

·         The global business cycle

·         Euro area bank lending conditions

Renewed concerns about the US Fed's ability to lower interest rates in coming months have triggered broader anxiety in financial markets over the past few days. In our charts this week we focus on:

·         South Korea’s trade flows

·         Euro area CPI inflation

·         US money market inflows

·         Global economic policy uncertainty

·         US productivity and new business applications

·         China’s credit formation and business surveys

Recent weeks have seen heightened optimism in financial markets that the global economy is on course for a soft landing. This optimism is rooted in a number of factors, including stronger-than-expected economic data, dovish communications from several central banks alongside tame inflation outcomes in Europe and Asia. In our charts this week we offer further perspective on this narrative. Specifically we look at:

·         Broad money growth and equity markets

·         The resilience of US capital spending

·         Receding inflation expectations in the euro area

·         Fading global supply chain pressures

·         Equity market inflows in Asia

·         India’s catch-up growth potential

The decisions from several central banks this week have, on the whole, amplified hopes that the world economy remains on course for a soft landing. Investors were certainly reassured by the absence of big changes to the Fed's interest rate outlook as well as this week’s unexpected decision to cut interest rates by the Swiss National Bank. In our charts this week we examine:

·         US interest rate expectations

·         Japan’s interest rate differentials and the yen

·         Core inflation in several advanced economies

·         Emerging market growth surprises

·         China’s credit impulse

·         Equity market inflows in major economies

With little to destabilise financial markets over the past few days, soft landing narratives have remained in vogue. While this week’s US CPI report was certainly a little stronger-than-anticipated, other indicators, including the latest UK labour market report, were more benign. In charts this week we look in more depth at:

·       US Inflation drivers

·       The health of the UK labour market

·       Japan’s supply side drivers

·       China’s EV penetration

·       Consensus growth forecasts

·       Economic shocks and the consensus

The equity market rally that kicked off in late October has grabbed the financial headlines in recent weeks. And there has been an abundance of optimistic narratives that support the rally’s rationale and the prospects for an extension in the near term. In this week’s charts we provide some insights into some of these narratives. In particular we focus on:

·       The renaissance in US manufacturing investment

·       AI and the global semiconductor sector

·       Positive global growth surprises

·       A cooling US labour market

·       Japan’s foreign investor inflows

·       Cryptocurrencies

Prospects for a swift pivot toward looser monetary policy in the US and Europe have been diminished by persistent inflationary pressures and stronger-than-expected labour market conditions over the past few weeks. Equity market sentiment in most major economies, however, has remained resilient, buoyed by a positive stream of corporate earnings news, especially from the technology sector. In our charts this week we focus on:

·       Consumer confidence in the US and Europe

·       US technological innovation

·       Semiconductor inventories in Asia

·       The Italian bond market

·       Credit conditions in the euro area

·       Internet sales in the UK

A quiet economic calendar coupled with holidays in North America and much of Asia have left markets struggling for direction in recent days. A noteworthy development, nevertheless, was this week’s FOMC minutes which revealed concerns among some members about reducing US policy rates too soon. In our charts this week we home in on the following:

·       Market expectations for Fed policy

·       Inflation surprises and energy prices

·       High frequency gauges of labour market activity

·       Wage inflation in the euro area

·       South Korea’s semiconductor trade

·       Social progress in the world economy