In today’s briefing:
- UK: Tax Not Breaking Cost Pressures
- Steno Signals #196 – What’s next for inflation given the US/China pause?
- US Inflation Trends Stick Against Tariffs
- Fears of Dollar’s Global Demise Overblown as Fed Avoids the Limelight
- Thai Rubber Production To Grow In 2025, But Rains, Prices Can Spoil Party
- Asia base oils demand outlook: Week of 12 May
- US-China Deal In Sight – O/W US Equities
- CX Daily: China, U.S. cool trade row with temporary cut in tariffs
- Will the India/Pakistan Conflict Push Cotton Prices Higher?
- Real Asset Chartbook Week #6: A Calm Week, From Our Perspective
UK: Tax Not Breaking Cost Pressures
- Underlying unemployment rates are broadly stable, despite higher headline and underemployment rates, where the latter lacks relevance to disinflationary pressures.
- Activity levels are expanding healthily and redundancies fell in April, suggesting no substantial jobs impact from the NICs rise, contrary to dovish fears.
- Wage growth should slow to accommodate some of the tax cost increase, but there isn’t much evidence yet. Total pay growth is little changed in recent years.
Steno Signals #196 – What’s next for inflation given the US/China pause?
- On the heels of the US/China “pause” announcement in the trade war, here’s a quick take on market implications and what to watch next:The initial market reaction has probably been more muted than many anticipated.
- Bond yields ticked slightly higher, gold softened, and there were modest tailwinds for regions and countries previously hammered by tariff exposure following yesterday’s “deal” in Geneva.
- But beneath the surface, several dynamics warrant a closer look.
US Inflation Trends Stick Against Tariffs
- A marginal downside surprise in headline US inflation measures preserves uncomfortably excessive trends, even without a significant tariff shock and with ongoing airfare falls.
- Companies may have helpfully smoothed out the tariff shock such that volatile policy never hits consumers. Services (ex-shelter) continued to grow too rapidly for rate cuts.
- Being in the right ballpark of the target isn’t good enough when the labour market remains tight. At least core price and wage inflation in the US isn’t as bad as in the UK.
Fears of Dollar’s Global Demise Overblown as Fed Avoids the Limelight
- The Fed left its policy rate unchanged last week. Chairman Powell is concerned about high consumer inflationary expectations . The Trump administration will play a role shaping interest rate expectations.
- The legacy of US economic activity on global capital flows will not vanish overnight. Any replacement for the dollar must be convertible and able to fund borrowers in offshore markets.
- Dollar depreciation against Asian currencies will produce economic headwinds due to the continued regional reliance on net exports. Trade finance is dominated by the dollar, even in regional transactions.
Thai Rubber Production To Grow In 2025, But Rains, Prices Can Spoil Party
- Initial projections hint at 4.93 million ton output in 2025
- Pre-tariff war Q1 2025 reports robust export returns
- Highest earnings from exports in 8 years at US$577.1 million in Feb
Asia base oils demand outlook: Week of 12 May
- Asia’s base oils demand likely to ease as signs of weaker-than-expected lube consumption incentivize blenders to trim inventory levels.
- Prospect of seasonal slowdown in consumption starting in a few weeks would coincide with expected completion of wave of plant maintenance work, boosting supply.
- Firm base oils margins, prospect of weaker fundamentals and low crude oil prices add to incentive to procure sufficient volumes just to meet term commitments.
US-China Deal In Sight – O/W US Equities
- The clocking is ticking for both Trump and Xi. We have reached half time. The de-escalation phase has started
- Trump has underestimated China and overestimated the leverage of America’s US$300bn trade deficit with the country. China is now less dependent on the U.S. market than it was in 2016.
- If China is playing hard ball its to gain leverage. A spike in US consumer inflation and/or a sharp slowdown in US domestic demand is the leverage it needs.
CX Daily: China, U.S. cool trade row with temporary cut in tariffs
- Gaokao / Cover Story: China’s decade-long quest to ease stress on pupils from an exam that shapes their life
- China-U.S. /: China, U.S. cool trade row with temporary cut in tariffs
- China-EU /: China, EU could keep clean tech partnership alive in other countries, economist says
Will the India/Pakistan Conflict Push Cotton Prices Higher?
- YTD our absolute return strategy is up 10,2% Will the India/Pakistan Conflict Push Cotton Prices Higher?
- India is an important exporting and producing country of cotton.
- According to the latest USDA data, India is the second-largest cotton producer behind China.
Real Asset Chartbook Week #6: A Calm Week, From Our Perspective
- US foreign direct investment (FDI) is shifting away from China and Hong Kong towards countries like Mexico, India, and major European nations due to geopolitical concerns.
- US multinationals are also showing early signs of reshoring and localizing supply chains in high-tech and advanced manufacturing sectors. Overall, these changes indicate a response to geopolitical tensions, although the process may take time to fully develop.
- The Techno-Industrial Policy Playbook discusses the need for effective policies to support U.S. industries in adapting to changing technologies.
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