DM Sovereign Rating Model For Q3 2020

Back in April, we warned that our own sovereign ratings model was pointing to many sovereign downgrades ahead. Indeed, Fitch’s downgrade on the UK to AA- back on March 27 was only the beginning. Since then, there have been thirteen rating moves, all negative. More are coming. Note that that the April edition focused only on the 17 major Developed Markets (DM) countries, while this edition goes back to covering the full 33 countries in our model universe.

Continue reading “DM Sovereign Rating Model For Q3 2020”

Drivers for the Week Ahead

  • This is likely to be one of the most eventful weeks we’ve seen in a while; the dollar remains within recent well-worn ranges
  • The US rates markets suggest trouble ahead; June retail sales report Thursday is likely to be the data highlight for the week; BOC meets Wednesday
  • The ECB meets Thursday; EU summit will be held Friday and Saturday in Brussels; UK has a heavy data week
  • OPEC+ meets Wednesday to discuss whether to extend its full output cuts; BOJ meets Wednesday; Australia reports June jobs data Thursday

Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

This is likely to be one of the most eventful weeks we’ve had in a while. Not only do three major central banks meet, but four EM central banks also meet, and we get important June and July data from the US, the first Q2 GDP reading from China, an OPEC+ meeting, and an EU summit. This comes as markets are grappling with still-rising virus numbers in the US and resurgent numbers in many other countries that call into question the durability of the economic recovery. With so many events impacting virtually all assets, we expect a volatile week ahead for the markets and may serve as a gut punch to risk assets like EM.

Continue reading “EM Preview for the Week Ahead”

Drivers for the Week Ahead

  • The dollar has been stuck in narrow ranges as markets contend with conflicting drivers
  • Last week’s jobs reports has likely set expectations high for the rest of the June data
  • Data highlight this week is likely to be ISM non-manufacturing PMI Monday; Canada reports June jobs data Friday
  • Chancellor Sunak addresses UK Parliament Wednesday Press reports suggest that Bank of England Governor Bailey is laying the groundwork for negative interest rates
  • Brexit talks between the UK and the EU continue this week; talks on the EU recovery fund will continue
  • Japan has a heavy data week; RBA meets Tuesday and is expected to keep policy unchanged

Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

Risk assets remain hostage to swings in market sentiment. Stronger than expected US jobs data last week was welcome news. However, the tug of war between improving economic data and worsening viral numbers is likely to continue this week, with many US states reporting record high infection rates. Continue reading “EM Preview for the Week Ahead”

Virus Numbers Pose Headwinds to US Economy

This is likely to be one of the most important US data months we’ve had in a while. While we have gotten some glimpses of June data already, this week brings the first major reads on the US economy. Over the next couple of weeks, we will even start to see some early July data trickle out, which is arguably even more important now that some states have had to slow or even reverse some reopening steps.

Continue reading “Virus Numbers Pose Headwinds to US Economy”

Drivers for the Week Ahead

  • Risk assets came under pressure last week as the virus news stream worsened; the dollar continues to benefit from risk-off sentiment
  • This is likely to be one of the most important US data weeks we’ve had in a while; it comes at a time when US economy is taking a step back just as Q3 is about to get under way
  • Jobs data is the highlight Thursday; claims data suggest market consensus of +3 mln s way too optimistic; FOMC minutes will be released Wednesday
  • France and Germany will meet Monday to discuss strategy on getting a deal struck on the EU pandemic rescue package
  • UK and EU begin their “intensified timetable” for Brexit negotiations; Riksbank meets Wednesday and is expected to keep rates on hold at zero; Japan has a heavy data week

Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

Risk assets came under pressure last week as the virus news stream worsened. It’s clear that large parts of the US will be forced to delay reopening until their virus numbers improve. Markets had gotten too bullish on the US recovery story and so this reality check soured sentiment. This is a very important week for US data, and we think risk sentiment will remain under pressure ahead of what we think will be a likely downside surprise in the US jobs number Thursday. Continue reading “EM Preview for the Week Ahead”

Recent Trade Developments Suggest Some Caution Ahead Warranted

There’s never a good time for a trade war. Yet here we are on the cusp of one between the US and the EU over unfair aircraft subsidies and comes at a time when renewed COVID-19 outbreaks are making the global economic outlook even cloudier. These developments suggest some caution ahead is warranted for risk assets like EM and equities. Continue reading “Recent Trade Developments Suggest Some Caution Ahead Warranted”