The “New, Normal” In EM Ex-China

EM economies ex-China are slowing to a “new, normal growth” phase, which will keep bulks and base metals under pressure this year and next. These economies join China in a broad-based EM slow-down, which will increase the supply-side slack in metals generally, and stretch out supply and inventories globally.

Private and public spending is ratcheting lower in EM ex-China markets. Real capital expenditures dipped into negative territory year-on-year as 2014H2 opened, while real private consumption decelerated to ~ 3% y-o-y.

Slowing EM Spending And Capex Will Pressure Industrial Commodities


Coupled with China’s “new, normal growth,” which we discussed last week, this provides another indication commodity price pressure will remain contained for the balance of this year and next. In addition, it raises the odds of a eurozone recession, to which the IMF last week assigned a 40% probability. This would hit commodity prices harder than markets expected earlier this year: EM growthwill no longer offset DM slack.

Euro Area: Potential For Upside Surprise?

Recent client visits uncovered that investors are uniformly bearish on Europe. What could go right? We offer two potential candidates for upside surprises in Europe: European banks have been hesitant to lend ever since the … [More.]

U.S. Equity Prices: Rout Over?

U.S. equity prices have stopped falling over the next last couple of days, but global growth headwinds will constrain the profit outlook. We retain our cautious bias. The recent drop in equity prices was sparked by weaker than expected growth … [More.]

(Part I) EM Credit Spreads: Unsustainable Divergence

EM sovereign and corporate credit markets have so far defied the selloff in EM equities and foreign exchange markets, but the odds of material spread widening are considerable. As G7 central banks have crowded out global fixed-income investors … [More.]

Global De-Sync Continues

The divergence between U.S. and European data continues. The ZEW survey of German investor sentiment hit a major snag in October, sinking into negative territory for the first time in almost two years. Investor confidence has clearly been … [More.]