Key takeaways

• The long awaited US elections are now behind us but may result in higher policy uncertainty.
• Global activity data remain steady in aggregate but varied by geography and sector.
• Inflation continues to grind lower, but there are risks from labour markets and commodity prices.

The recent US election news is likely to dominate headlines for coming weeks – with the second term of President Trump set to add to global policy uncertainty. Which policies are implemented, to what degree and when, remains uncertain – with trade policy likely to be a key area of focus.

Rates heading lower

Despite this uncertainty, many central banks across the world are continuing (or starting) their interest rate cutting cycles. The Federal Reserve lowered rates for a second time in November – and we expect further easing in December – while the Bank of England and European Central Bank have also delivered rate cuts in recent weeks (charts 1 & 2). There is also a growing group of central banks seemingly in a race to neutral – with Sweden’s Riksbank and the Reserve Bank of New Zealand joining the Bank of Canada in stepping up the pace of monetary easing.

Source: Macrobond

Source: Macrobond

In the emerging world, more central banks in Asia are starting to ease – with Thailand the latest to join in. In Latin America, Brazil stands out in turning back towards rate increases and is worth watching – potentially a warning sign of what could happen elsewhere if growth and/or inflation pick up.

Economic data picking up

The global economic data are also faring reasonably well. Although the outlook is still decidedly mixed between geographies and sectors, we saw a pick-up in the latest set of global PMI data and the latest rounds of stimulus appear to be having a positive impact on some of the Chinese data (charts 3 & 4). Weak spots remain in Europe, but even there we saw some upside surprises to Q3 GDP and some better survey data.

Source: Wind

Source: Macrobond. Note: FAI is Fixed Asset Investment

Sectorally, one area yet to recover is property. As rate cuts build, we could see house prices – which have already begun to rise in major developed markets – push higher, and we could see transaction volumes and construction activity improve from very depressed levels further down the line.

Inflation risks remain

Inflation data have continued along a more favourable trajectory across the world, but risks are still there. Many commodity prices have risen in recent months and labour markets are showing more resilience than they were a few months ago. Although things are clearly softening a touch, a more resilient labour market and demand outlook could make policy makers question the pace and magnitude of their easing cycles in the coming months.

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/2024-11/