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We think the yields of Japanese government bonds will continue to rise, but because of BoJ hikes rather than concerns about fiscal sustainability. Fragile bond market sentiment hasn’t been limited to the US lately: a sharp rise in yields in Japan has …
23rd May 2025
The passage of Donald Trump’s ‘one, big beautiful bill’ through the House of Representatives today has done little to calm nerves in the bond market, which had already been frayed by Moody’s recent decision to downgrade the US’ sovereign credit rating and …
22nd May 2025
Debate over the end of US equity exceptionalism had quietened over the past month amid a historic rally, but with US assets selling off today debate may reignite. Our sense is that US stocks will hold up well against their peers over the rest of the year. …
21st May 2025
We see dimmer prospects for oil prices over the next year or so. But we think that will keep being a sideshow for US equity and bond markets. Admittedly, there has been a sizeable effect on the share prices of US energy companies in general, which is …
20th May 2025
The de-escalation of the US-China trade war and the Trump administration’s wider reduction of tariff rates means that a sharp depreciation of the renminbi has become less probable. While we continue to think the greenback will rebound a bit against most …
19th May 2025
The decision by Moody’s to downgrade the US government’s credit rating highlights that there are several potential storm clouds on the horizon for Treasuries, even if the downgrade itself doesn’t seem so far to have made much of a market splash. …
There are still a few signs of stress in US financial markets. That’s despite this week’s ongoing rebound in the S&P 500, which has taken it well above its level on “Liberation Day”. It reflects the fact that investors have more to worry about than just …
16th May 2025
The de-escalation in the US-China trade war gave the dollar a renewed boost against most G10 currencies this week. But, a fall back in Treasury yields has taken away some of those gains as we head into the weekend, and trade talks have been a double-edged …
One month on from the peak of the post-“Liberation Day” market turmoil, calm has largely returned and most key asset markets have recovered much, or all, of the ground lost in the days following 2 nd April. Indeed, core money markets never looked …
15th May 2025
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. European markets have had a strong start to the year, and we are …
We think the recent “bear flattening” of the US Treasury yield curve has a bit further to run. The story in the Treasury market over the past few weeks has generally been one of bear flattening (short-end yields rising by more than long-end ones) as …
On balance we suspect the US dollar will be positively correlated with the performance of the US stock market (i.e. it will have a “positive beta”) over the next year or so. But we don’t think that the greenback’s role as a “safe haven” is over for good, …
The strong lead for far-right candidate George Simion in Romania’s presidential election, and the collapse of the coalition government last week, led to the largest one-week fall in the leu since 2009. We estimate that the exchange rate is still …
14th May 2025
The rolling back of tariffs has coincided with a recovery in big tech in the US and China. (See Chart 1.) Their dual rally is something new since Donald Trump returned to the White House. We think there’s a good chance it will continue, despite the US …
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. Most euro-zone governments look set to continue running large budget …
Despite the US-China truce, we still think inflationary pressures will prompt the Fed to stay pat for a while yet. But we doubt the 10-year Treasury yield will rise much more from here, even though investors are still pricing in rate cuts. That’s because …
13th May 2025
Global Trade Stress Monitor …
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. There has been an increase in optimism about the EU in recent months …
12th May 2025
Just over a month ago, we ditched our long-held forecast that the S&P 500 would end this year at 7,000 , and revised it all the way down to 5,500. While that looks like it might have been a mistake, we aren’t inclined to re-adopt such a positive view. We …
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
The dollar has edged higher against most major currencies over the week as a whole, supported by the FOMC’s pushback against expectations of policy easing in the near term. The turmoil in some Asian currency markets at the end of last week also appears to …
9th May 2025
Thanks to continued optimism over prospective trade deals to reduce US tariff rates, asset markets have generally recouped most of their losses after the 2 nd April tariff announcement. That said, we think that the boost from further trade negotiation …
We still think investors are expecting too many Fed cuts over the remainder of this year, and our base case remains that Treasury yields will rise and the US dollar will strengthen. The Fed struck a very cautious tone in Wednesday’s policy statement, and …
8th May 2025
We expect government bonds in China to continue to perform well against a backdrop of looser monetary policy, but suspect its currency won’t depreciate as much against the greenback as we had previously envisaged. Meanwhile, we have mixed feelings about …
7th May 2025
We see a few reasons to be sceptical about the chances of a broad-based upwards revaluation of Asian currencies, despite recent moves. At the time of writing the breakneck rally in Asian currencies vs. the US dollar seemed to have come to a screaming …
6th May 2025
The dollar is ending the week on the backfoot, despite the ongoing normalisation and returning risk appetite across financial markets, as well as a generally decent set of US economic data. Somewhat surprisingly, the greenback remains well below its pre-2 …
2nd May 2025
The stronger-than-expected April US Employment Report published today leaves us comfortable with our central scenario that the trade war won’t be enough to tip the US economy into recession. So, we think the Fed will keep its focus on inflation and stand …
Despite the Bank of Japan’s dovish tone today we think it won’t be long before JGB yields start to rise again. And even though concerns about Japanese capital repatriation have seemingly been back on investors’ minds lately, we don’t think higher JGB …
1st May 2025
We think the recent outperformance of euro-zone equities over US ones has run its course. The eight-day winning streak in the S&P 500 may break today, after the market opened down over 1% on news that the US economy unexpectedly contracted in Q1 , on …
30th April 2025
The US stock market and the dollar have fared worse over the last hundred days than they fared during the first hundred days of all other presidential terms since 1980. What’s more, there has been an intervening rout in the Treasury market. It is hard to …
29th April 2025
Although the Liberals have just missed out on a majority, Prime Minister Mark Carney should still be able to implement his fiscal plans with support from the NDP or Bloc Québécois. If anything, the need to grant concessions to those parties means fiscal …
Financial markets have staged a robust recovery over the past couple of weeks, even if they are for the most part not quite back to square one after the post-2 nd April turmoil. Given the ongoing uncertainty around US trade policy and the economic outlook …
28th April 2025
Financial markets have continued to stabilise and the dollar has finally rebounded a little over the past few days. More than anything, that appears to reflect relief after the Trump administration has suggested it may dial back tariffs a bit further and …
25th April 2025
The sharp fall in the dollar over the past three months can for the most part be explained by a rapid reassessment of the outlook for the US economy and financial markets, rather than an imminent threat to the dollar’s dominant status in global finance. …
We suspect the US dollar will recover some lost ground over the coming months as its usual relationship with rate differentials reasserts itself. Seemingly dovish comments from Fed speakers, including Fed Governor Christopher Waller and Cleveland Fed …
Despite further encouraging headlines on tariff reduction, a relief rally in Asian markets trading today has been notable by its absence. This reinforces our view that further gains in equity markets will become harder from here. Two stories broke on …
24th April 2025
Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased. But the fact that the rally was sparked largely by conciliatory remarks from US President Trump – …
23rd April 2025
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
While the turmoil across financial markets has eased a bit this week, the dollar has continued to weaken across the board. The gap between actual exchange rates and what short-term interest rate differentials point to has widened a bit further, suggesting …
Our base case is that the turmoil across financial markets in the wake of President Trump’s “Liberation Day” announcement will continue to stabilise. As such, we assume that most asset prices and the dollar will recover some ground, with equities faring …
We think China will continue to allow the renminbi to weaken, perhaps all the way to 8.0/$ . Today’s market moves in China emphasise yet again how US trade policy remains the key driver of financial markets right now. Despite a stronger-than-expected Q1 …
16th April 2025
While the dust from the market sell-off continues to settle, there are few signs that the turmoil in equity and sovereign bond markets has sparked broader instability or a self-reinforcing downward cycle. Our base case is that market conditions will …
15th April 2025
The ongoing fallout across financial markets from President Trump’s “Liberation Day” announcement has resulted in a sharp fall in the dollar and what looks increasingly like a generalised loss of confidence in the US as a safe haven in currency and bond …
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
Available data don’t give a definitive answer to whether sales by Chinese institutions contributed to the recent volatility in the US bond market. But China’s state managers of foreign assets still appear to have more than half of their portfolios …
After another tumultuous week across financial markets, the dollar is on track for one of its worst weeks on record. At this point, the main question for the dollar is no longer what the direct effects of President Trump’s tariffs (many of which were …
11th April 2025
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
US President Trump’s decision to pause the implementation of many of his previously announced tariffs has sent markets – especially equities – soaring, but there are some risk premia remaining that might take longer to fade. We’d flagged only on Monday …
10th April 2025
US Treasuries are not benefitting from market turmoil, and we suspect they will keep struggling. Today, China announced that it would charge an additional 84% tariff on imports from the US starting on Thursday. Unsurprisingly, equity markets didn’t take …
9th April 2025
