Daily Brief Macro: France: Déjà Vu? and more

• Despite the near certainty that the Bayrou government will fall on 8 September, investors are wary, rather than spooked, reckoning that they have seen all this before.
• They are likely correct to judge that compromises will then be found, allowing the 2026 budget to be passed by a new centrist government.
• However, this would again only be putting off the day when a real crisis point is reached.

• Global oil demand remains relatively healthy with little signs of a near term global recession
• Sanctions on Russia and Iran could impact oil supply, but buyers are finding ways to navigate around restrictions
• Non-OPEC supply is expected to outpace global demand, leading to a surplus and potentially pushing prices into the 60s by year end.

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• Meanwhile, the other commodity cohorts are now deeply “undervalued” when compared to the price of gold.
• Commodities excluding gold, relative to gold prices, have fallen to their lowest level since 2021, according to a graphic by Topdown Charts…
• In the latest UBS CTA-flow analysis, the investment bank says that it “expects more agricultural buybacks in the coming weeks.” 

• Despite concerns about loss of independence during a second Trump administration, the Fed will always be answerable to Congress in terms of the policy conduct towards achieving its dual mandate.
• The Fed has enjoyed independence from the Treasury since 1951, but it has achieved better inflation outcomes since being required to pursue a politically imposed dual mandate.
• Both the Bank of England and the Bank of Japan have been bestowed with greater independence, but both have struggled to achieve their respective inflation targets since the COVID-19 pandemic.

• Global growth has been revised upwards since June, with a persistent trend in positive economic data.
• The Fed is facing pressure to cut rates, with markets already pricing in a September easing.
• EM local markets are looking appealing, with credit suffering from valuation issues rather than fundamental problems.

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• June exports dipped 1.04% YoY but rose 11% month-on-month  
• Sri Lanka uses diplomacy to safeguard US$300 million US market  
• Domestic Reforms, EU market access next on agenda

• Steepening of the 530s treasury curve globally is at historically high levels, driven by different factors in the US, Europe, and the UK
• US curve steepness is reflective of repricing of additional Fed easing, while Europe’s steepening is technical and related to Dutch pension fund transitions
• Market hesitancy to fade the steepness due to ongoing technical flows in Europe and front-end driven steepening in the US, with uncertainty surrounding terminal rates in both regions

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Critical Minerals Outside of China Will Command A Strategic Premium
• As risk appetite in the mining sector increases, the biggest gains will be in the junior miners and exploration companies
• We highlight eight companies as a basket of such miners which should benefit from these trends

• Inflation in the first half of August stood at -0.02% bw due to a positive surprise in core inflation.
• With this result, the annual rate rose slightly to 3.49%.
• For this fortnight, the market consensus was at 0.12% bw and our estimate at 0.08% bw. T

• Banco de México’s balance of payments data shows that in the first half of the year, Foreign Direct Investment inflows totaled USD 34.3 billion, 2.2% higher than in the same period of 2024.
• Of the total investments, USD 28.9 billion (84%) corresponds to reinvested earnings, USD 3.1 billion (9%) to new investments, and USD 2.2 billion (6%) to intercompany reinvestment.
• The performance of new investments stands out, registering an annual growth of 63% compared to the same period of the previous year, reaching levels not seen since 2023.