2024-09-30 07:30
Key takeaways On 24 September, China unveiled an outsized easing package… …but this may just be the start, in our economists’ view. USD-RMB performance hinges on any improvement in Chinese asset inflows and US election risks amongst others. On 24 September, China’s regulators, including the People’s Bank of China (PBoC), the National Financial Regulatory Administration (NFRA), and the China Securities Regulatory Commission (CSRC), held a joint press conference, announcing a slew of easing policies, covering three main areas: monetary policy, property policy, and capital market policy. The measures are summarised in the table below: Source: Xinhua, Bloomberg, HSBC The stimulus package, beating market expectations, is more cyclical in nature, but is a good starting point for further easing to shore up growth, in our economists’ view. More will have to be done in terms of housing stabilisation, but it may take longer to be rolled out. As there is a need to support liquidity and market sentiment, facilitate credit issuance and boost growth, our economists now expect a further 10bp cut to interest rates, another 50bp of RRR cut, and another RMB1trn of special government bonds to come before the end of 2024. As for the RMB, the offshore RMB (known as “CNH”) strengthened briefly past 7 per USD for the first time since May 2023, as markets are digesting these stimulus measures this morning (Bloomberg, 25 September 2024). In our view, if the new measures offer fresh expectations of a comeback of equity inflows into China or a potential revival of risk appetite, the RMB may see more support. But the question remains whether the inflows will be strong enough to offset other potential drags on the RMB. For example, with the PBoC’s monetary easing, China’s yield gap against the USD may widen again, especially considering that markets pricing for US rate cuts have been more dovish than the Federal Reserve’s latest dot plot (i.e., 80bp of rate cuts vs 50bp by end-2024, Bloomberg, 25 September 2024). Uncertainties over the upcoming US elections may support the USD, and by extension, weigh on the RMB. It is also worth noting that the PBoC shifts to a neutral FX policy stance, with the governor, Pan Gongsheng, reiterating the central bank will prevent onesided expectations and overshooting risks. As such, the PBoC is likely to maintain two-way fluctuation of the RMB exchange rate. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/flash-2024-09-25/
2024-09-30 07:30
Rate cuts and broadening earnings growth support our optimism despite slowing growth and rising uncertainties Last quarter proved to be an eventful period for investors, as more central banks embarked on their policy easing journeys, while rising US recession fears and the sharp strengthening of the Japanese Yen triggered a global equity market sell-off. However, markets regained the lost ground very quickly, which is a good sign that fundamentals such as earnings momentum remain intact. Looking ahead, investors shouldn’t be surprised if market volatility lingers, especially as key central bank meetings and elections are approaching in the US. Yet, we remain positive, as there are still plenty of opportunities across regions and sectors to put money to work. What does this mean for investors? So far this year, equities are up strongly while bonds have been benefitting from rate cut expectations. Although the US economy is cooling, it’s still far from a recession, with Q2 earnings growth accelerating to 10.8%, which marks the highest growth rate since Q4 2021. And comfortingly, rising unemployment was caused mainly by an increase in labour supply rather than elevated layoffs. As fundamentals remain broadly positive, the August correction is seen as a buying opportunity as valuations are now more attractive. The US remains our biggest equity overweight due to its broadening earnings growth and long-term structural opportunities. While the Magnificent 7 tech stocks continue to lead earnings growth, other companies are also benefitting from falling costs and the power of AI, which helps to expand revenue sources and improve productivity. The global rate cut cycle should also help investment and consumption outside of the US. So, the key message for investors is to widen the opportunity set, by looking beyond the US and the technology sector. Geographically, the UK, Japan, India and South Korea stand out for their positive outlook. From a sector perspective, earnings hold the key, and we see promising opportunities in healthcare in Europe, high-end manufacturing in Asia and industrials in the US, to name a few. Balancing risk and opportunity to manage rising market uncertainties Undoubtedly, all eyes will be on the Fed’s policy decision and the upcoming US election, with polls currently suggesting a very close race. Historically, markets tend to rally once the election result is known, but uncertainty is surely building up. Diversification is key to balancing risk and opportunity, and we look to quality bonds, particularly investment grade credit, as another way to diversify exposure and generate a stable income stream. Rate cuts will make it less attractive to hold cash, while bonds continue to offer a chance to lock in current yields near multi-year highs. Finally, we continue to see opportunities in the global transition to a more sustainable, low-carbon future. Renewable energy is a bright spot amid a global effort to triple clean energy capacity by 2030. The growing focus on biodiversity can also be a differentiator, offering investors a way to access potential growth while supporting long-term change. As improving quality of life for our customers is at the centre of our values, we’re pleased to share our views in a special article on how financial planning can improve financial fitness, based on the findings of our Quality of Life Report 2024. We hope our investment themes and insights can help you better position your portfolios in times of rising uncertainties and take your investment to new heights. As always, our investment team is here to share our view and provide you with the support you need. Best wishes for a successful investment journey. https://www.hsbc.com.my/wealth/insights/market-outlook/investment-outlook/2024-09/
2024-09-30 07:30
Important Risk Warning AUD Support / Resistance vs USD 0.6827 / 0.7052 ⬇ AUD rose against USD yesterday as weak U.S. payrolls drove broad dollar selling, offsetting Australia’s trade deficit; firmer metals and risk appetite also supported gains. AUDUSD rose 0.42% yesterday while AUDHKD ended at 5.42 level. EUR Support / Resistance vs USD 1.1295 / 1.1593 ⬇ EUR gained versus USD as a soft U.S. jobs report weakened the dollar; euro-area unemployment fell to 6.2% and investors scaled back Fed tightening bets. EURUSD rose 0.48% yesterday while EURHKD ended at 8.96 level. GBP Support / Resistance vs USD 1.3168 / 1.3492 ➡ GBP appreciated against USD as weak U.S. payrolls hit the dollar; Catherine Mann’s hawkish comment and UK fiscal discipline also supported sterling. GBPUSD rose 0.53% yesterday while GBPHKD ended at 10.46 level. NZD Support / Resistance vs USD 0.5593 / 0.5832 ⬇ NZD rose against USD as weak U.S. payrolls weighed on the dollar; firmer commodities and risk appetite helped, with Chinese demand in focus. NZDUSD rose 0.44% yesterday while NZDHKD ended at 4.46 level. RMB Support / Resistance vs USD 6.7540 / 6.8205 ➡ CNH firmed against USD as dollar weakness after soft U.S. payrolls spread in Asia; calmer oil prices and improved sentiment supported the yuan. USDCNH fell 0.09% yesterday while CNHHKD ended at 1.15 level. CAD Support / Resistance vs USD 1.4003 / 1.4303 ⬇ CAD appreciated against USD as weak U.S. payrolls hurt the dollar; lower oil prices limited gains, but the loonie benefited from broad dollar retreat. USDCAD fell 0.24% yesterday while CADHKD ended at 5.53 level. JPY Support / Resistance vs USD 159.60 / 162.71 ➡ JPY rose against USD as weak U.S. payrolls hit Treasury yields; intervention vigilance unsettled short-yen positions, supporting the yen. USDJPY fell 0.90% yesterday while JPYHKD ended at 4.86 level. SGD Support / Resistance vs USD 1.2815 / 1.3005 ⬇ SGD appreciated against USD as weak U.S. payrolls pushed the dollar lower; improved risk sentiment and steady regional growth views supported the Singapore dollar. USDSGD fell 0.22% yesterday while SGDHKD ended at 6.06 level. MYR Support / Resistance vs USD 4.0290 / 4.1445 ➡ USDMYR opened around 4.09 yesterday morning at the back of less than hawkish tone from Warsh and with US NFP later tonight. In the morning session, USDMYR traded in better offer tone with better USD selling interest from market participants. USDMYR closed at 4.08 for the day. This morning, US NFP headline came in lower with lower 2 months revision contributing to broader USD softness overnight. USDMYR opened at 4.07 this morning and is expected to continue trading in broader range of 4.05 – 4.10. ⬆ Up Trend, indicates that the currency has been moving higher against the USD ➡ Consolidation, indicates that the currency's movement against the USD has remained sideways ⬇ Down Trend, indicates that the currency has been moving lower against the USD https://www.hsbc.com.my/wealth/insights/fx-insights/daily-focus/fx/
2024-09-30 07:30
Key takeaways Federal Reserve rate cuts move closer and US election uncertainty rises. The bulk of global macro data are holding up better than many might think… …but there are still plenty of risks and weak spots out there. Summer 2024 was an eventful one. While many people were on their holidays we had a combination of big market moves, worries about recessions, geopolitical uncertainty, and shifting prospects for the US presidential election race. But, beneath the headlines, the global macro data have, largely, ticked along. Worries are aplenty about the state of the US labour market, but after the August data, which were more sanguine than in July, those concerns may fade slightly. Divergent data The broader suite of US labour market data is less alarming than the rise in the unemployment rate, in any event. Employment growth has slowed but layoffs are low (Chart 1), the spike in initial jobless claims appears to have been seasonal and consumers have kept spending on a range of products. Confidence may be a little subdued, but the world’s largest economy keeps growing steadily (Chart 2). Source: Macrobond Source: Macrobond The same can’t be said everywhere. Chinese growth data continue to disappoint, particularly on the consumption side, and more policy support is likely to be needed to achieve the 2024 growth target. In Europe, growth remains a problem in Germany (but not in Spain) with the industrial data, in particular, posing a challenge. Labour markets are still tight, though, and real wage growth should continue to prop up consumer spending. Falling inflation The global inflation picture is mixed, but broadly improving. The US has seen a notable drop in inflation over the past three months (Charts 3 and 4), and although we haven’t seen the same moves across the board, many central banks have now seen enough to start, or continue, their easing cycles. For the Federal Reserve, the question is now about the pace of easing – with labour market data set to take on an even greater focus in the coming months. Source: Macrobond Source: Macrobond Poised to cut For most central banks the question is how quickly they will cut rates, which depends on the data. In some economies, like Canada and Sweden, policymakers have already turned much more dovish given lower inflation and weaker growth data. In contrast though there has been a clear warning sign from Brazil, where currency weakness and fiscal concerns have prompted a change in tune, and the next move for rates is likely to be up. And now, the US Presidential election comes into focus. With two months to go until 5 November, the polls suggest a very close race for both the presidency and control of Congress. The outcome of the vote will have an impact on growth and inflation scenarios going into 2025. 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 https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/2024-09/
2024-09-30 07:30
Key takeaways Average temperatures are rising; the sensitivity of food prices across each category to temperatures has risen sharply. In fact, temperatures have become far more useful than rains in forecasting food inflation. Normalising temperatures in recent months will likely open the door for RBI easing in 4Q2024; but over time, with average temperatures rising, inflation management could get harder. A couple of years ago, we pointed out that reservoir levels matter more than rains for India’s food production and inflation. In this report, we go a step further, moving from rains and reservoirs to temperatures. We find that temperatures do a much better job in explaining and predicting food output and inflation. Average temperatures and their volatility have risen over time. Global warming is indeed a well-documented reality. In India, the impact of the March 2022 and March 2024 heatwaves are fresh in the mind. The correlation between average temperatures and India’s food inflation has risen sharply over the last decade. And this is true across individual food groups –perishable crops, durable crops, and animal protein sources. This, then, brings us to another important question. If the importance of temperature has risen over time, what role do rains and reservoirs play? We bring out our trusted food inflation model, which explains food inflation with changes in reservoir levels, minimum support prices, and government food management steps. When we throw in temperatures, reservoir levels lose importance. They get ‘crowded out’. When we include temperatures but exclude reservoirs, the model becomes even better than before in predicting food inflation (i.e. the R-squared rises). What does this mean? Temperatures have become far better than rainfall in explaining and forecasting food inflation. There are several possible reasons. One, with irrigation facilities improving over time, the impact of low rains can be better managed, while there’s no magic wand for rising temperatures. Two, reservoir levels and temperatures have a 50% correlation. A lot of the information contained in the reservoir variable gets picked up by temperatures. Three, there is a non-linear relationship between temperatures and food inflation. With temperatures rising, the sensitivity of non-perishable food inflation to average temperatures has grown even faster than perishables (5x vs 3x over 10 years). What should we expect in the short run? Following the debilitating March heatwave, temperatures have normalised. Applying our model coefficient, food inflation could fall by 2ppt over the next few months, lowering headline inflation by 1ppt. Headline inflation has averaged about 5% so far in 2024. By end-2024, headline, core, and food inflation are all likely to converge towards the 4% target, opening up space for rate easing. We expect two 25bp repo rate cuts, taking the policy repo rate to 6% by March 2025. Forget the raindrops... A couple of years ago, we pointed out that reservoir levels matter more than rains for India’s food production and inflation, as reservoirs not only capture contemporaneous rains, but also hold rain that has fallen in previous rain episodes. This is important at a time when unseasonal showers have increased in frequency. In a more recent report, we pointed out that trends in reservoir levels have changed in recent years. For instance, they are much lower now in the important sowing month of July than they used to be. Not a surprise that seasonality patterns in food prices are changing too. All these weather changes are making inflation more volatile and inflation expectations harder to anchor (see exhibits 1 and exhibit 2). It is no surprise that inflation forecasting errors have risen. In this report, we take a next step, from rains and reservoirs to temperatures. True, the two are somewhat correlated. Periods of low rainfall tend to have higher temperatures. Climate events like El Niño are associated with low rains and high temperatures, and climate events like La Niña are associated with stronger rains and lower temperatures. We find a 50% negative correlation between rains and temperatures over the last two-odd decades. Yet, we find that temperatures carry more information than rains and do a much better job in explaining and predicting food output and inflation. There are some good reasons why you should be tracking temperatures more closely than you have in the past. Let’s explain. ...bring out your thermometers We have an extensive database of average surface temperatures across India since the 1950s. We created a monthly deviation-from-normal series, which shows that average temperatures are rising over time. And alongside this, so is temperature volatility (see exhibit 3). Neither of these is a surprise. Global warming is indeed a well-documented reality. What we find next is that, with an appropriate lag, the correlation between average temperature and India’s food inflation has been rising consistently over time (see exhibit 4). As the earth is heating up, crop yields are falling. Indeed, scientists and researchers project that a 2.5-4.9 degrees Celsius increase in temperature across the country could lead to a decrease in wheat yields of 41-52%, and a fall in rice yields of 32-40% The heatwave of March 2022 lowered the sugar cane crop yield by 30%, while hurting the production of vegetables, as well as oilseeds. In the heatwave of March 2024, temperatures rose to 50.5 degrees Celsius in some areas, leading to heat stress. The sharp rise in vegetable prices was a reflection of the crop damage. Temperature’s rising impact on perishable and durable food All of this is clearly visible across various food items. Analysing a decade of data, we find the correlation between average temperature and food inflation has been rising across all the main crops – perishables (vegetables and fruits) and durables (cereal, pulses, oilseeds and sugar). And this is not just limited to crops. Even the price of dairy, poultry and fishery products, which we, on aggregate, call animal protein sources of food, are becoming increasingly sensitive to rising temperatures (see exhibits 5-12). Most perishable crops are short-cycle crops (e.g. vegetables, where a new crop can be harvested every 2-3 months). These crops have traditionally been more sensitive to heatwaves than others, and this sensitivity is rising. We find the average correlation between temperature and price for the perishables to have risen from 20% (average of 10 years) to 60% (average over the last year), marking a 3-fold increase (see exhibit 13). Correlation between surface temperature and prices of various food items Durable crops are long-cycle crops (e.g. cereal, which are harvested every 6-12 months). Together with the animal protein sources, they have traditionally been less sensitive to temperatures, but sensitivity is growing, with the correlation rising from 10% (average of 10 years) to 45% (average over the last year), marking a 5-fold increase. The rains versus temperature debate This, then, brings us to another important question. If the sensitivity of food production and inflation to temperatures has risen over time, what role do rains and reservoirs play? To answer this carefully, we get a little more technical than just running correlations. We bring out our trusted food inflation OLS model, which can help us parse the role of temperatures on food inflation better, while including other variables that also impact food inflation. First, we re-run our old food inflation model for the 2007-2024 period (see regression 1 in exhibit 14). It includes: Reservoir levels – this variable picks up the y-o-y change in reservoir levels every June. The government’s minimum support prices for agriculture – this is based on agricultural input prices and a fixed mark up. Supply-side food price management steps – we find that nimble steps by the current government to buy-sell from government granaries, import-export, and quickly transport food items across the country have helped lower food inflation over the last decade. Clamping down on hoarders has helped too. We capture all of these supply-side management steps with a dummy which switches on in the last 10 years. Pandemic dummy – while farming activity was not directly hurt by the pandemic-related lockdowns (which were more applicable to urban areas), food trade and distribution were impacted. We capture this with a dummy that switches on in the pandemic years 2020-22. Each of these variables is economically and statistically significant in explaining food inflation trends. The model has a strong R-squared of 82%. Next, we include temperature in our model (see regression 2 in exhibit 14). And it doesn’t sit too comfortably with the other variables. The temperature variable is clearly statistically significant, but the reservoir variable turns insignificant. This could mean that temperature is crowding out the significance of reservoirs. Perhaps the temperature variable contains all the information which the rainfall variable holds, and more. Because, the fit of the model improves. R-squared increases from 82% to 88%. Finally, we keep the temperature variable in the model but remove the reservoir variable (see regression 3 in exhibit 14). And this drastically improves our model. Each of the explanatory variables is economically and statistically significant. And the model’s R-squared is at an elevated 88%. What’s really changed? Temperatures are far superior than rainfall in explaining and forecasting food inflation. In fact, once temperatures are included, there is no value in analysing rains and reservoir levels. Indeed, over time, the coefficient of reservoir in our regression model has been falling, indicating than its importance has dwindled (see exhibit 15). There could be a couple of reasons for this. One,with irrigation facilities improving over time, the low rains problem has been partly circumvented, especially in certain areas like north-western India (which is also known as the food bowl of the country). Two, with reservoirs and temperatures having a 50% correlation, our sense is that a lot of the meaningful information contained in the reservoir variable gets picked up by temperatures. Three, there is a non-linear relationship between temperatures and food inflation. As we saw above, with temperatures having crossed certain thresholds, the sensitivity of non-perishable food inflation to higher temperatures has grown even faster than for perishables (5x vs 3x over the last decade, though in level terms, the correlation is higher for perishables). Normalising temperatures: Outlook for inflation and RBI action The heatwave in March to May 2024 were characterised by temperatures which were, on average, 1.5-2 degrees Celsius higher than the previous year. Since then, temperatures have normalised. The El Niño weather phenomenon from last year has made way for La Niña, associated with cooler temperatures and stronger precipitation. Temperatures have fallen c0.5 degrees Celsius over the last month (compared to the Mar-Jun period). Applying our model coefficient, if this persists, food inflation could fall by 2ppt over the next few months, lowering headline inflation by 1ppt. Headline inflation has averaged just below 5% so far in 2024. With normalising temperatures and falling food prices, it could fall to c4% by end-2024 (see exhibit 17). In fact, by March-2025, headline, core, and food inflation, are all likely to converge towards the 4% target. Indeed, with temperatures cooling after a severe heatwave earlier this year, we expect the RBI to start easing rates in 4Q2024. We expect two 25bp repo rate cuts, taking the policy repo rate to 6% by March 2025. While this is good news at a time when temperatures are normalising, it is worth keeping it in the back of our minds that over the medium term, rising temperatures could become a big problem for inflation management. The impact of weak rains can be managed by better irrigation facilities, but there is no magic wand to manage the impact of rising temperatures. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/2024-08/
2024-09-30 07:30
Key takeaways China’s new package of economic stimulus helped drive European stock markets higher last week. A quick glance at the returns of major credit markets this year, shows Asian high yield as a standout performer. But tactically, some caution is warranted following the blistering run and macro and geopolitical risks. Yields on 10-year French bonds rose above their Spanish equivalents last week for the first time since 2007. Chart of the week – China’s policy push Chinese policymakers have unveiled a raft of new measures aimed at reviving the stock market, together with an easing of monetary policy and more efforts to stabilise the property sector. The move is a co-ordinated policy push to boost economic confidence and asset markets. For markets, new measures include facilities to give eligible financial institutions liquidity to buy stocks, support share buybacks, and help major shareholders raise holdings. A national stabilisation fund is also under consideration. The securities regulator also issued guidelines to promote M&A and restructuring to help boost the value of listed firms. On monetary policy, the 7-day reverse repo rate was cut by -0.20% to 1.5%, and the reserve requirement ratio for large banks was lowered, boosting liquidity. For the property sector, supportive measures include lower rates for existing mortgages, a lower downpayment ratio for second homes, and more funding for the property destocking scheme. The moves follow the previous week’s US rate cut, which eased pressure on the yuan and gave China’s central bank room to cut rates as it seeks to reflate the economy. The near-term effect on stocks is clearly positive – with China’s Shanghai Composite index rising nearly 13% last week, and EM markets enjoying a broad pick-up in sentiment (see chart). Chinese leaders have also vowed to intensify fiscal support, and further improve the focus and effectiveness of policy measures. This is welcome, given that a sustainable recovery in Chinese stocks is likely to hinge on clear signs of macro reflation and a corporate earnings recovery. Market Spotlight ‘Hyper-sensitive’ markets Investment markets are ‘hyper-sensitive’ to macro news. But with inflation in retreat, and faster labour market cooling now the top risk for investors, the source of hyper-sensitivity has shifted. It’s the jobs data that move markets now. A new report by researchers at the Bank for International Settlements documents this idea well. The authors find that market hyper-sensitivity has become more acute in recent years because of an increasingly data dependent US Fed, which has focused on the next few months rather than longer run policy anchors. This has fostered a ‘data point dependency’ in investment markets. This summer’s bouts of volatility caused by surprises in non-farm payroll data and core CPI inflation were good examples. It showed how short-term data can be noisy, and why it’s not healthy when the data cycle controls market trends. It means the surprisingly-low stock market volatility seen earlier this year is unlikely to return. Hyper-sensitive markets, the risk of faster growth cooling, election uncertainty, geopolitical tensions, plus an interest rate market already expecting the Fed funds rate to be 3% by next summer, all point to a more volatile environment in Q4. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. This information shouldn't be considered as a recommendation to buy or sell specific sector/stocks mentioned. Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 11.00am UK time 27 September 2024. Lens on… China policy boosts European stocks China’s new package of economic stimulus helped drive European stock markets higher last week. European firms have relatively high exposure to China, so new policy support and robust signalling of more measures to come have been welcomed. It’s particularly good news for countries like Germany, which continues to labour under an industrial downturn. Market gains have come amid a broadening out of performance across sectors in Q3. The bloc’s relatively modest exposure to the technology sector compared to the US has played in its favour. And despite some weakness in recent macro and company news, investors have remained risk-on. Expectations of a soft landing have been particularly helpful to left behind, rate-sensitive sectors, with real estate, healthcare, and utilities in top spot during the quarter. European stocks currently trade on a 5% discount to their long run average 12-month forward price-earnings ratio of 13x. Earnings have lagged but are expected to rise to 10.2% in 2025. That could present selective value opportunities, but earnings could also be sensitive to a more pronounced global slowdown – so some caution is warranted. Asian high yield’s blistering run A quick glance at the returns of major credit markets this year shows Asian high yield as a standout performer. Spreads – as measured by the benchmark JP Morgan Asia Credit Index (JACI) – have collapsed, continuing the strong recovery from late 2022’s yield spike as a number of China’s beleaguered property developers defaulted. Last week’s China stimulus package is good news for the asset class. Not only does it boost cyclically sensitive names in the region but also helps provide a floor for China’s property names – the most volatile part of the universe. And with this sector now a much smaller component of the overall index, default rates should continue to moderate. Exposure to non-China names is also increasing, including in growth superstars such as India and ASEAN economies. The trend of increasing country and sector diversification implies significantly less volatility over time. Spreads remain high versus their 10-year historical range, implying room for further gains. But tactically, some caution is warranted following the blistering run and macro and geopolitical risks. Eurozone’s blurred lines Yields on 10-year French bonds rose above their Spanish equivalents last week for the first time since 2007. The yield gap between the two has tightened in recent months, after trading as wide as 0.45% earlier in 2024. Eurozone peripheral country bonds, including Spain’s, have been in particular demand since the ECB began cutting rates in June. Investors have been attracted by their relatively high yields, as well as positive signs of fiscal consolidation and improving debt ratios. Italy, Portugal, and Greece have also captured attention. By comparison, there has been growing unease over France’s deteriorating public finances and political uncertainty, which has put pressure on its bond spreads. Recent market pricing offers evidence of a blurring of lines between the eurozone’s traditional core bond markets (Germany and France) and its riskier periphery. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. This information shouldn't be considered as a recommendation to buy or sell specific sector/stocks mentioned. Any views expressed were held at the time of preparation and are subject to change without notice. Source: HSBC Asset Management. Macrobond, Bloomberg, Datastream. Data as at 11.00am UK time 27 September 2024. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 11.00am UK time 27 September 2024. This information shouldn't be considered as a recommendation to buy or sell specific sector/stocks mentioned. Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. Market review Risk assets rallied on details of a comprehensive stimulus package to support the Chinese economy, with China’s Politburo pledging further fiscal action to come. Core government bonds softened with Treasuries underperforming Bunds ahead of key US employment data. Global equities were broadly positive, led by a rally across emerging markets. China’s Shanghai Composite and Hong Kong’s Hang Seng indices surged, with Chinese stocks enjoying their strongest week since 2008. Korea’s Kospi and India’s Sensex posted modest gains. In developed markets, the Euro Stoxx 600 touched new highs, outperforming the S&P 500, with China-exposed luxury goods stocks recording notable gains. Japan’s Nikkei 225 also performed well, supported by a weaker yen. In commodities, oil prices retreated on rising supply worries. Copper and gold were both on course to close the week higher. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/2024-09-30/
