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In their latest podcast Brunello Rosa and Manas Chawla discuss how we are entering the "Era Of Chaos,": when no country has global leadership.
10 May 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the growing risks for NATO’s Article 5 as the cornerstone of post-WW2 global geopolitical equilibria
3 May 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the results of the latest IMF Spring meetings in Washington DC.
1 May 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the West should be wary about seizing Russian assets to finance Ukraine's resistance.
19 April 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the outcome of the latest Ambrosetti forum.
12 April 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the re-militarisation of Europe, facing the threat of Russia's "war economy"
5 April 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss how Putin is turning Russia into a “war economy,” after the latest falsified elections
28 March 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the latest moves by the world's major central banks.
22 March 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the upcoming Biden-Trump race won’t simply be a re-match of the 2020 election.
15 March 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the UK budget, Central Bank and upcoming elections.
8 March 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the Russia-Ukraine war two years in, and why a solution is not yet in sight.
29 February 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss how Navalny’s death reveals the strength of Putin’s regime in Russia, but also its fragility.
22 February 2024
In June 2023, Rosa & Roubini Associates has been recognised for the second consecutive year as the best independent macroeconomic research & advisory firm by Corporate Vision Magazine
R&R provides independent research on the global economy
R&R provides independent advice on global issues
by Brunello Rosa
13 May 2024
The Bank of England concluded the April-May cycle of major central bank meetings last week, confirming that a new phase is about to begin. Already in March, the Swiss National Bank (SNB) was the first to cut rates in developed markets in this cycle, from 1.75% to 1.5%. Last week the Swedish Riksbank followed the SNB, cutting its repo rate from 4.0% to 3.75%.
As we discussed in our review, the Bank of England has already opened the door to a cut in its Bank Rate in June, although such a move cannot yet be considered a done deal. As governor Bailey said, it’s neither a “fait accompli”, nor an event that can be “ruled out.” A key issue will be the inflation and labour market data of the next two months; two full sets of data will be available before the 20th of June, with the second inflation release being scheduled for May 19th, the day before the MPC meeting. In May, the April CPI inflation figures will show a large drop from the current 3.2% due to base effects, but the May figure released in June may show an upward surprise that could convince the MPC to wait until August before announcing the first rate cut of this cycle. Additionally, Bailey may want to achieve a larger consensus and prefer to wait six more weeks rather than push through the MPC a decision with a razor-thin majority.
Also in Europe, as we discussed in our recent review, the ECB is considering its first 25bps rate cut a fait accompli, and it is clear that all the discussion within the Governing Council (CG) at the moment is about the Bank’s next moves. The doves within the GC would prefer to cut rates at every meeting until December, to bring the deposit rate to 2.75%.
On the other hand, the hawks would rather reduce the number of rate cuts to a minimum, perhaps to only two by the end of the year. As usual, a compromise will be reached, and three cuts by the end of the year are likely warranted. Data will tell if there is space for an additional rate cut in the next seven months.
On the other side of the pond, the US Federal Reserve has instead made clear that this is still no time to start cutting rates. The domestic economy in the US is still too strong, in spite of its recent deceleration, and its labour market too is robust (in spite of the recent relative softening) to begin an easing phase. We are now looking at the second half of the year to see the Fed start to cut rates, which it may do twice before the end of the year. On the other hand, we believe that the view that foresees the Fed hiking rates, instead of cutting them, is unfounded.
Finally, finishing our tour of the major central banks with a jump to the other side of the Pacific, the Bank of Japan is in a totally different phase compared to those of Europe or North America. After having ended its negative deposit rate facility and its Yield Curve Control policy, it is now in its tightening phase. The market would have expected more action from the Bank to have taken place since March, but instead the BoJ has remained prudent about its next moves; it is still unconvinced about the sustainability of inflation above the 2% target over the medium term. This has caused the Yen to depreciate further since the policy action took place, forcing the Ministry of Finance to supposedl) intervene in the market, so far unsuccessfully. Only a real change in tack in the policy stance (relative to the Fed’s) could convince market participants that the Yen will not depreciate further.
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by Robin Gwinner
14 May 2024
by Brunello Rosa and Nato Balavadze
9 May 2024
by Gulf State Analytics
2 May 2024
by Nouriel Roubini and Brunello Rosa
26 April 2024
Week: 15 - 21 May 2024
The Week Ahead: EZ QOQ GDP To Advance; Inflation To Edge Down In US; Headline Inflation To Remain Unchanged In EZ
In the US, in April, headline and core inflation is expected to edge down to 3.4% y-o-y (p: 3.5%) and 3.6% y-o-y (p: 3.8%). In April, retail sales are likely to decelerate to 0.4% m-o-m (p: 0.7%).
In the EZ, in Q1, according to the second estimate, GDP growth is expected to advance by 0.3% q-o-q (p: -0.1%) and 0.4% y-o-y (p: 0.1%). In April, headline inflation is seen remaining unchanged at 2.4% y-o-y (p: 2.4%), while core inflation is likely to cool off to 2.7% y-o-y (p: 2.9%). In March, IP is likely to contract by -0.3% m-o-m (p: 0.8%). In May, ZEW Economic Sentiment Index is seen rising to 46.1 (p: 43.9).
Among the largest EZ economies, headline inflation is expected to: i) increase by 2.2% y-o-y (p: 2.2%) in Germany; ii) edge down to 2.2% y-o-y (p: 2.3%) in France; and iii) ease off to 0.9% y-o-y (p: 1.2%) in Italy.
In the UK, in March, unemployment rate is likely to edge up to 4.3% (p: 4.2%).
The Quarter Ahead: US To Impose New Tariffs On Chinese EVs; Israel Escalates Pressure On Rafah; Israel Arms Sale
US To Announce New Tariffs On Chinese Electric Vehicles. The announcement, expected next week, will build upon measures initiated by Trump. The plan includes targeted levies on EV-related industries such as batteries and solar cells, alongside existing tariffs. This review of tariffs on Beijing, which started in 2018, aims to address trade imbalances. Biden's extension of Trump's 27.5% tax on Chinese EV imports has significantly limited Chinese-made cars in the US market.
Israel pushes back into northern Gaza, increases military pressure on Rafah. Israel deployed tanks into eastern Jabalia in northern Gaza following intense aerial and ground attacks overnight. Health officials reported 19 deaths and numerous injuries. The death toll in Gaza due to Israel's military operation has exceeded 35,000 Palestinians, leading to severe devastation and a humanitarian crisis.
Israel arms sale. The Biden administration stated that Israel's utilization of U.S.-supplied weapons in Gaza likely breached international humanitarian law. However, due to wartime conditions, U.S. officials could not definitively confirm this in particular airstrikes. The UK foreign secretary Cameron stated that implementing a ban on arms sales to Israel would only bolster Hamas. He clarified that while he does not endorse a major ground offensive in Rafah, the UK will not follow the US in halting some arms exports. He emphasized that the UK supplies only 1% of Israel's weapons and urged Israel to enhance civilian protection and facilitate humanitarian aid access.
Real Economy: UK QoQ GDP Advanced; EZ PMI Increased; BoE Stayed On Hold
In the US, in May, Michigan Consumer Sentiment fell to 67.4 (c: 76; p: 77.2).
In the EZ, in April, HCOB Services and Composite PMIs increased to 53.3 (c: 52.9; p: 51.5) and 51.7 (c: 51.4; p: 50.3). In March, retail sales increased by 0.7% y-o-y (p: -0.5%) and 0.8% m-o-m (c: 0.6%; p: -0.3%).
In the UK, in Q1, according to preliminary estimate, GDP advanced by 0.6% q-o-q (c: 0.4%; p: -0.3%) and 0.2% y-o-y (c: 0.0%; p: -0.2%). In March, IP decelerated to 0.5% y-o-y (c: 0.3%; p: 1.0%).
BoE stayed on hold. In the UK, the BoE maintained its Bank Rate at 5.25%.
Financial Markets: Stock Prices and Bond Yields Increased; Dollar Rose; Oil Prices Are Unchanged, While Gold Prices Rose
Market Drivers: In the US, the stocks market was up due to robust earnings and impressive reports from tech giants. In Europe, shares closed higher driven by stronger corporate earnings and growing optimism about imminent interest rate cuts by major central banks.
Global Equities: Increased w-o-w (MSCI ACWI, +1.7%, to 782.06). The US S&P 500 index edged up (+1.9% w-o-w, to 5222.68). In the EZ, share prices declined (Eurostoxx 50, +3.3% w-o-w, to 5,083.55). In EMs, equity prices increased (MSCI EMs, +1.0%, to 1,071.64). Volatility fell to 12.55 (VIX S&P 500, 52w avg.: 20.9; 10y avg.: 17.6).
Fixed Income: w-o-w, the 10-year US Treasury yields are virtually unchanged (+0 bps to 4.50%). The 2-year US Treasury yields increased (+6 bps to 4.87%). The German 10-year bund yields increased (+2 bps to 2.51%).
FX: w-o-w, the US Dollar Index increased (DXY, +0.1%, to 105.31; EUR/USD +0.1%, to 1.08). In EMs, currencies edged up slightly (MSCI EM Currency Index, +0.0% w-o-w, to 1,725.61).
Commodities: w-o-w, oil prices virtually unchanged (Brent, 0.0% to 82.78 USD/b). Gold prices rose w-o-w (+2.5% to 2,366.9 USD/Oz).
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