This week's charts and research highlights from Variant Perception.
Chart of the Week
UK growth leading indicators recovered a little this month but still paint growth downside risks.
Benign globally, messy locally - Aug. EM/DM Leading Indicator Watch
(August 26)
Our global diffusions still point to steady growth and a fading inflation impulse. The calm is visible only in aggregate, as each country varies.
For DM, UK is the clearest negative growth outlier, so we stay long SONIA Dec-27 futures (SFIZ7).
We would fade any rise in AUD 2y yields back towards the year’s highs above 4.75%. We are looking to re-establish long JPY after taking profit on our short CHF vs long JPY Aug 3.
For EM, idiosyncratic risks override good growth LEIs. We take profit on our Indonesian equity long.
[Video Discussion]
Speakers: Tian Yang (CEO & Head of Research) & Hugh Vuillier (Head of Client Relations)
DM
UK: Growth headwinds + fading inflation impulse => Stay long SONIA Futures (SFIZ7)
Japan: Impossible trinity still not resolved, expect more JPY policy actions
Australia: Housing headwinds + negative real wage growth => look to fade rise in 2y yields
Sweden: Positive outlier as growth LEI remains very strong, retain bullish SEK bias
EM
Brazil: Growth leading indicators remain resilient, waiting for October elections to pass
S. Korea: Economy remains K-shaped, as semi boom has yet to trickle down
India: RBI regime model remains hawkish, El Niño food inflation risks remain
Indonesia: From extremely hated to less hated, take profits on equity
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