The US performed well in 2018, but there are already signs of softer growth, particularly in the housing market and on capital spending. Political tensions remain high with the President highly critical of the Federal Reserve’s stance on monetary policy while the current government shutdown could be a prelude of more disruption to come now that
With less than three months until the UK leaves the EU, the economy is
The Chinese economy is weakening, as shown by manufacturing surveys, but fiscal stimulus should soon be in place to counter the risk of rising unemployment in private enterprises. The central bank will use its new tool, the Targeted Medium-term Lending Facility (TMLF ) to provide lifelines to private and small companies. We are monitoring the yuan trend to confirm if it warrants a milder depreciation forecast in the wake of the change in the central bank’s exchange rate policy stance.
Japan’s economy was severely hit by the weather, with a partial recovery now being seen. However, inflation continues to undershoot expectations, while Bank of Japan rhetoric is keeping a lid on bond yields, although the real target may be to moderate yen appreciation.
The recent downturn in bond yields, prompted by political worries, may continue in the near term. However, we expect US yields shift back towards the upper end of their current range as concerns about core US inflation and rising issuance reassert themselves.