2025-12-08 12:01

Key takeaways Labour market softness in the US and a disinflationary budget in the UK should ensure near-term rate cuts… …but with inflation and domestic demand surprising on the upside in parts of G10, not every central bank is cutting… …and a few are turning a little more hawkish. Fears of an AI bubble spooked the market in November, but with earnings and global growth holding up (including some notable upside Q3 surprises in Asia) and some easing of trade uncertainty, global equites are just below their late-Oct record highs. US government re-opened The US government’s record-long 43-day shutdown finally ended on 13 November, after President Trump signed a bill which extends government funding through to the end of January. It also guaranteed back-pay to all federal workers, which could lift Q1 GDP. Data releases are still delayed though, with the next set of key BLS and BEA releases – like payrolls and CPI – not scheduled until after the Federal Reserve (Fed)’s 10 December meeting. Some lagging US data have already been released, including August trade data, which showed a smaller US trade deficit. This was likely reflecting some payback following earlier frontloading trends. Tariff uncertainty prevails though, as sector tariffs could change, and we await a Supreme Court ruling on the International Emergency Economics Powers Act (IEEPA) tariffs. Yet some tariffs are falling too, given the recent détente between the US and China, and, following signs that tariffs are raising consumer prices, several agricultural products have been excluded from scope. Source: Macrobond Source: Macrobond September labour market data were mixed, with an upside surprise from payrolls (119,000), but the unemployment rate ticking up to 4.4%. Other data, for October, showed falling job openings, higher layoffs, and lower confidence, seemingly locking in the prospect of a December rate cut, even amid dissent on the FOMC. Source: Bloomberg, HSBC forecasts Note: OIS = Overnight Index Swap Source: Bloomberg, HSBC forecasts Note: OIS = Overnight Index Swap Disinflationary UK budget The UK’s much-anticipated Budget leaves many structural issues unresolved, but it stuck to the fiscal rules and more than doubled the fiscal headroom. Railway fare and energy price freezes should keep CPI trending lower, supporting further Bank of England (BoE) rate cuts. Meanwhile, Japan’s cabinet approved a 3.2% of GDP economic stimulus, supporting our case for a Bank of Japan 25bp rate hike in December. Easing cycles nearing an end Elsewhere, it has become clearer that other central banks are at the end of their easing cycle. The European Central Bank (ECB) and ASEAN countries look set to be on hold in the coming year, so first out of the blocks on rate rises is likely to be the Reserve Bank of New Zealand. With an upswing now evolving, we now expect a rate rise in Q3 2026. With firming demand and core inflation above the Reserve Bank of Australia (RBA)'s 2-3% target band, the RBA will also likely raise its policy rate by Q3 2026. Strong India growth Despite very strong Q3 growth of 8.2% y-o-y in India, lower inflation provides scope for further easing. Fiscal and monetary stimulus also loom for China where the October data disappointed. Investment, consumption, and industrial production slowed, as external and domestic demand remained subdued. The property sector is also showing renewed weakness, with a steeper fall in primary home sales and real estate investments. Source: Bloomberg, HSBC ⬆ Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus Source: LSEG Eikon, HSBC *October data in this release will not include unemployment rate https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/a-hawkish-tilt/

2025-12-08 08:05

Key takeaways Gold prices are supported by risk aversion and a weaker USD. Central banks continue robust gold purchases, while Italy reviews gold reserve ownership. In our precious metals analyst’s view, USD softness and policy risks may sustain gold prices in 2026, but volatility is expected. Gold prices have recently returned to around USD4,200 per ounce, underpinned by increased risk aversion and growing expectations of a 25bp rate cut by the Federal Reserve (Fed) at its 9-10 December meeting. The recent weakness in the broad USD − reflected by the US Dollar Index (DXY) falling below 99 − has further supported gold prices, given their typically inverse relationship (Chart 1). However, with markets having largely priced in the anticipated rate cut (Bloomberg, 4 December), any subsequent decline in the USD is expected to be modest. While gold’s upward momentum remains intact, our precious metals analyst notes that a lack of improvement in physical demand may constrain further near-term gains. Meanwhile, official sector demand for gold remains strong. The World Gold Council reports that central banks purchased a net 53 tonnes of gold in October, marking the highest monthly increase this year and a 36% rise from September. Nonetheless, potential changes are on the horizon, as the Italian government considers amending the ownership structure of central bank gold reserves. Previous attempts to transfer these reserves to the Treasury have faced resistance from EU authorities, citing Lorenzo Bini Smaghi of the Institute for European Policymaking. Italy currently holds the world’s third-largest official gold reserves, behind only the US and Germany. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Looking ahead, the appointment of the next Fed Chair, following Jerome Powell’s term ending in May 2026, will be a key factor for markets. The new appointee is unlikely to prompt a significant hawkish policy shift, keeping the USD defensive and favouring gold in 2026 (Chart 2). In addition, persistent geopolitical, fiscal, and economic policy risks are likely to sustain upward pressure on gold, although our precious metals analyst expects heightened volatility and some price moderation in 2H26 as supply-demand dynamics evolve. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/gold-rally-to-extend-into-2026/

2025-12-05 07:04

Key takeaways UK economic data showed a subdued environment in the run up to the Chancellor’s Autumn Budget. GDP growth slowed in Q3 while unemployment rose and pay pressures moderated. The Autumn Budget left a more stable fiscal position but did little to bolster growth. Source: HSBC Some greater stability gives a better foundation for growth The months leading up to the UK Autumn Budget were clouded by high uncertainty and policy speculation, which appear to have contributed to a slowing in activity momentum. Indeed the PMI survey pointed to a slowing in growth in November with a notable downturn across the services sector, which reported a contraction in new order volumes. Notwithstanding that softness, against a backdrop of Budget uncertainty, activity surveys have been a less reliable signal of overall GDP growth, in fact, overestimating economic growth in Q3. The UK economy eked out a 0.1% q-o-q expansion in the third quarter as business investment fell, and despite a small uptick in household consumption, a slowdown in government spending, which has been a driver of growth in recent quarters, weighed on overall growth. It's possible that the economy sees a ‘bounce-back’ in the coming quarters. With the majority of fiscal tightening backdated into future years, the near-term outlook is little changed. While greater ‘headroom’ against the Chancellor’s fiscal targets should see a period of greater policy certainty, if that can translate into higher confidence, then the UK could see some upside news in Q1 2026. Following the 2024 Autumn Budget and a weak H2 2024, Q1 2025 growth was robust at 0.7% q-o-q. But let’s be honest, given the low bar set in Q3 (and expected in Q4), some relatively more positive news early in 2026 shouldn’t be too difficult. Higher unemployment and slower pay growth Elsewhere, a weak demand backdrop and higher unit labour costs have seen a continued softening in the labour market throughout 2025. The unemployment rate rose to 5.0% in the three months to September and more timely payroll and survey data point to further headcount reductions in Q4. Private sector pay growth slowed to 4.2% 3m/yr in September and given the slack building in the labour market, we expect more muted pay pressures into 2026. However, a further increase in the National Living Wage to around 66% of median earnings and over 70% in some regions is new territory for the UK economy, while firms’ wage growth expectations have ticked higher in recent months, to 3.8%, up from 3.5%. Whether firms respond through headcount reductions or higher inflationary pressures, both are risks for the UK economy in 2026. UK Autumn Budget: Economic need to know for businesses From a macroeconomic perspective, there was very little in the Autumn Budget that was judged to bolster economic growth – the OBR went as far as explicitly saying so. As such, and despite higher government borrowing and expenditure in 2026, the OBR downgraded its annual 2026 GDP forecast to 1.4%. While a lack of substantial growth initiatives is a disappointment, the additional headroom against the main fiscal target to have the current budget balance in 2029/30 was welcomed. An increased margin of error from GBP9.9bn to GBP21.bn conditioned on a lower GDP growth path raises the bar for that headroom to be eroded and improves the resiliency of the UK to market or external economic shocks. Indeed, the market reactions in government bond yields and sterling have been positive. However, the Budget did little to address the underlying challenges in UK public finances and therefore medium to longer term risks remain. Namely the prospect of further undershoots in the UK’s economic performance. Notably, despite the downgrade to productivity growth to 1.0%, the OBR remains more optimistic than other forecasters and the historical average. Moreover, with tax rises and some real-terms departmental spending cuts pencilled in for 2029/30, it raises the risk of ‘fiscal fictions’, i.e. whether those measures will be enacted when the time comes. To address those concerns, the government has announced its intention to bring forward passing legislation on some measures: at the time of writing, the cap for pension salary sacrifice at GBP2,000 appears to be the focus, alongside updated business rate valuation – both additional costs to firms in the coming years. Source: Macrobond, ONSl, HSBC Source: Macrobond, OBR, HSBC https://www.hsbc.com.my/wealth/insights/market-outlook/uk-in-focus/a-better-foundation-for-growth/

2025-12-01 12:02

Key takeaways The NZD has strengthened after the RBNZ’s hawkish cut, potentially marking the end of the easing cycle. Market sentiment is positive regarding the UK Autumn Budget, supporting the GBP. In our view, the NZD seems to have found a bottom, while GBP-USD may gain further over the near term. Over the past week, the NZD led the performance among G10 currencies, with the AUD and GBP following closely (Chart 1), driven by specific domestic factors. On 26 November, the Reserve Bank of New Zealand (RBNZ) cut its policy rate by 25bp to 2.25%, as widely expected. The central bank’s policy rate projection indicates a minimal additional reduction of 5bp, with the lowest rate expected by June 2026. Governor Hawkesby noted that this aligns with the rate remaining stable in 2026. The RBNZ emphasised that the significant 325bp reduction since August 2024 is bolstering demand, and the unemployment rate has peaked. Following this announcement, NZD-USD jumped, driven by rate dynamics (Chart 2). With a floor now established under the terminal rate, we believe the NZD has found a bottom. Any improvement in risk appetite could further strengthen the NZD as the year draws to a close. Note: Data as of 27 November 2025 (19:25 HKT). Source: Bloomberg, HSBC Source: Bloomberg, HSBC Like the NZD, the AUD has been benefiting from similar drivers. With both headline and core CPI inflation for October surprising on the upside, markets have dismissed the likelihood of rate cuts by the Reserve Bank of Australia (RBA), anticipating a hold instead (Bloomberg, 27 November 2025). We believe the AUD’s support through the rates channel is becoming limited. Meanwhile, the GBP has experienced a relief rally following the UK’s Autumn Budget announcement on 26 November. Markets responded positively to a GBP26bn tax increase for 2029/30, which provides GBP22bn of fiscal headroom. Additionally, enhancements to child benefits may have mitigated immediate political risks. In our view, GBP-USD could rise further over the near term, influenced by factors on the US side (please refer to “FX Viewpoint - USD: Fed unknowns” for details). https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/nzd-and-gbp-beyond-relief-rally/

2025-11-28 12:01

Key takeaways The US government shutdown has come to an end. Historically, real GDP tends to rebound in the following months as federal spending resumes. We remain overweight on US stocks due to solid earnings momentum and the AI transformation broadening opportunities across IT, Communications, Utilities, Financials and Industrials. However, uncertainty over Fed policy, job creation and the build-out of AI has led us to trim US exposure and diversify into Asia, gold and hedge funds, while preferring investment grade over high yield. AI adoption and domestic consumption are twin tailwinds for Asia. In South Korea, strong memory demand, solid earnings expectations and the Corporate Value-Up programme justify our overweight stance. Japan is also upgraded to overweight, supported by a re-rating opportunity linked to the new Prime Minister’s agenda, governance reforms and record-high share buybacks. These upgrades complement our preference for mainland China, Singapore and Hong Kong, as well as Asian investment grade credit, reflecting the positive momentum in the region. While the UK Budget has eased near-term fiscal concerns by increasing headroom to GBP22bn, economic momentum remains fragile, reinforcing market expectations of policy easing around year-end while we lean towards February 2026. The high level of net government debt and the reversal of quantitative easing policies mean that gilt yields trade with a risk premium. We prefer GBP investment grade credit and remain neutral on UK stocks as re-rating catalysts are lacking. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/ai-transformation-broadens-exposure-across-asia-and-sectors/

2025-11-24 12:01

Key takeaways Table of tactical views where a currency pair is referenced (e.g. USD/JPY):An up (⬆) / down (⬇) / sideways (➡) arrow indicates that the first currency quotedin the pair is expected by HSBC Global Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks. The arrows under the “current” represent our current views, while those under “previous” represent our views in the last month’s report. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-trends/usd-strength-to-diminish/