This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. HEM: May-26 Views & Challenges
- April’s ceasefire helped unwind some of March’s moves. Economist views decay towards more hawkish pricing.
- The supply shock keeps growing, raising pressure to hike, but a forceful cycle would be more like 2003 than 2022.
- Dovishly biased assumptions at the BoE skew risks and surprises higher, sustaining persistent excess inflation.
2. RBA Hikes Not Decisively Above Neutral
- The RBA’s 25bp hike to 4.35% was broadly expected; upside inflation risks and energy shocks keep a tightening bias in place for 2026.
- New forecasts show inflation above target to mid‑2027 and a higher terminal rate path near 4.7%, raising the bar for any early easing.
- Future moves hinge on energy prices, inflation expectations and demand: data must undershoot forecasts for the RBA to pause, let alone cut.
3. Uneven Fallout of Middle East Conflict on Emerging Markets, but Asia More Vulnerable to Stagflation
- The impact of the US/Israel-Iran conflict has been uneven across emerging markets (EMs), largely determined by the reliance on Middle East-sourced energy.
- The endgame for corporate sectors in EMs will depend on their exposure to Middle East energy supply constraints and higher energy costs, as well as the pricing power of companies.
- Corporations in Malaysia and Thailand face the largest potential corporate credit stress stemming from a prolonged Middle East conflict, while Chilean and Mexican companies lead the way in Latin America.
4. Banxico Cuts to 6.50% as Cycle Ends
- Banxico cut by 25bp to 6.50%, in line with consensus expectations, and signalled the end of the easing cycle with a high‑for‑longer stance.
- Above‑target inflation, upside risks and only gradual convergence to 3% limit scope for further cuts despite weaker growth.
- Future moves hinge on durable disinflation, persistence of slack and Fed policy; markets should focus on the duration of the pause, not new easing.
5. Norges Bank’s Hawkish May Move
- Norges Bank’s earlier‑than‑expected 25bp hike to 4.25% demonstrates a strong anti‑inflation bias and reinforces its restrictive policy stance.
- Future moves hinge on CPI‑ATE, wage growth, NOK and commodity prices; current guidance still allows for another hike later in 2026.
- Downside growth risks argue for caution, but policy will stay tight until durable disinflation reduces concern about de‑anchored expectations.
6. Supply Chain Cold War
- The announcement at the end of April that the UAE (and others) need to access US dollar swap lines has potentially huge implications for the illiquid parts of US$ asset markets.
- If they try and redeem, price discovery could be brutal, but even if they don’t, where is the cornerstone funding going to come from to keep the show on the road?
- The only answer is governments, i.e. taxpayers.
7. Asian Equities: Nascent Revival in FII Flows in April, but a Long Way to Go
- We argued that Asia was oversold in March. In April FIIs bought back a little, US$1.58bn, predominantly in Taiwan (US$7.83bn). They bought US$493m in Korea and sold US$6.47bn in India.
- Our study of last 20 years FII investment shows that the present episode is the largest quantum of FII selling in Asia in a short period.
- The large Asian markets, Korea, Taiwan and India, are all near their troughs in terms of 6-monthly cumulative FII selling as percentage of market cap. India could get sold more.
8. Asian Equities: The Earnings Juggernaut Is Rolling on and Getting Broad-Based
- Asian earnings estimates are being revised up stupendously. Over past 6 months, 2026 consensus EPS is up 16%. 63 market-sectors out of 159 saw upgrades, vs 30 few months ago.
- While the main drivers are Korean and Taiwanese tech, the spill-over from tech into consumption sentiment and investment propensity are visible. Korean retail, financials, Taiwanese financials have had significant upgrades.
- The pedestrian upgrade to China’s EPS and the downgrade to Hong Kong’s are surprising. Our preferences remain on Korean tech, industrials, defense, financials, Taiwanese tech, Chinese basic materials, HK financials.
9. HEW: Trump’s Salsa Turns Policy Tighter
- Trump is leading a salsa dance for security in the Middle East as the conflict steps back and forth, with central bankers forced to dance along to the accumulating shock.
- The Norges Bank surprised with an early hike, while the RBA delivered another hike, and Banxico brought its cutting cycle to an end. Payrolls beat again, offset by the details.
- Next week’s releases include US inflation, Euro area GDP and employment, plus what is set to be another spurious Q1 surge in UK GDP amid residual seasonality.
10. Riksbank Holds, Risks Skew Up
- The Riksbank holds at 1.75% as expected, in a data‑dependent pause with a mild hawkish bias given rising energy‑driven inflation risks.
- Weaker‑than‑forecast growth and sub‑target core inflation argue against near‑term hikes, but limit any case for easing.
- Future moves hinge on war‑related energy shocks, global policy rates and the krona’s role in imported inflation.
