Daily Brief Macro: The Great Game – 7 Takeaways from G7 and more

In today’s briefing:

The Great Game – 7 Takeaways from G7

Steno Research reporting live from Japan where the G7 meeting in Hiroshima just concluded yesterday.
Here’s our 7 main takeaways – both geopolitical and financial
What will G7 do about China, world peace and AI?

Taiwan’s political parties have concluded their nominations for the 2024 presidential polls. Despite voter approval for Tsai’s leadership, victory for her party is not guaranteed.
China would tone down its hawkishness in the run-up to the polls to avoid spooking voters towards voting for the Beijing-skeptic DPP.
Taiwan’s internal political dynamics are also shifting; a strong showing by the new Taiwan People’s Party may show appetite for a middle ground in cross-strait relations.

China is paying the price for the excessive investment and leverage of the past 20 years, while headwinds are building to current components of demand.
Beijing appears to be focused on long-term political and economic challenges. It is downplaying the current downside risks in the belief that these can be sorted out with relative ease.
The short-term recovery is thus at risk of losing momentum. Expect more episodes of economic distress in the public and private sectors.

There can’t be a Pivot. Before the Fed can cut rates to a less restrictive level of unemployment must rise.
There can’t be a Skip and Hike. US Macro Momentum is fading, and investors are underestimating the impact of tighter lending standards.
Eventually, the Fed will be forced to cut. Markets expect this, but for the wrong reason.

The Flash PMIs diverge between manufacturing’s depression and rudely resilient services activity. It’s a similar story for the UK, EA, and US as they resist recession.
Their unemployment rates are lower than a year ago, except in the UK, where there has been a slight rise of questionable statistical significance.
Persistent excess demand is inconsistent with ending the inflation problem. We still expect another BoE hike and two from the ECB. Further Fed steps could extend that.

Debt /: Cover Story: China’s effort to move mountain of ‘hidden debt’ faces uphill climb
G7 /: China protests G7 communique, saying it interferes in domestic affairs
Covid-19 /: China’s post-reopening second Covid wave could peak in late June, expert says

E-commerce /In Depth: Chinese fast fashion platforms could be next U.S. target
Sentiment /: British firms ‘conditionally optimistic’ about their China operations in 2023
AIDS /: HIV/AIDS cases in China fell 13% during pandemic, expert says

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