The current risks are towards more ECB easing, but because medium-term risks are tilted to the upside, we think markets will remain firmly anchored around a 1.75% landing zone. In the US, the ultra front end has a tight feel to it, while longer tenor yields have a more loose tendency. We identify some technical factors driving this
In a dovish turn, the Philippines’ central Bank, the BSP, has cut rates by 25bp to 4.75%, citing softening growth and subdued inflation. Infrastructure spending concerns and corruption scandals add downside risks to our 2026 GDP outlook. The chances of a final 25bp rate cut in December have increased meaningfully
The Nikkei Index can be estimated using nominal GDP, net domestic fund demand (corporate savings rate + fiscal balance), Abenomics dummy and Economic Policy Uncertainty Index. For the current Q225, if we place nominal GDP at around JPY624trn and net domestic fund demand at +1.3%, and assume that global uncertainty continues, the macro fair value would be around JPY34,800, roughly in line with the prevailing Nikkei index
US inflation print failed to provide a sustained improvement in investor sentiment in Asia. Investors potentially view the inflation data as not being weak enough to immediately change the outlook for the Fed. US President Donald Trump’s threats of retaliatory tariffs against the EU’s counter tariffs to the US steel and aluminium tariffs are also weighing on sentiment.
During the course of 4Q24, European 12M forward earnings estimates started to improve, while they softened slightly in the US after increasing by 13% in 2024, as Chart 2 shows. This was largely driven by expectations of gradually increasing growth in Europe, while growth rates in the US are expected to slow slightly.
