Equity enthusiasm
By Peter Rosenstreich
Global markets are celebrating US tax reform. Asian stocks followed the record session on Wall Street. This bull market keeps running past forecasts, and profit-taking to lock in a solid year is not happening.
The World Bank increased its forecast for China’s economic growth in 2017 to 6.8% up from 6.7% in October. In 2018 China is likely to outpace consensus forecast. Our view of China and its RMB currency have brightened. The Bank of China’s 5-basis-point hike in front-end reverse repo and 1-year medium-term lending facility rates was less about managing immediate threats and more about signalling a tightening bias across monetary, regulatory and liquidity policies.
Dollar doves flap
By Peter Rosenstreich
With a warning from US Federal Reserve banker Neel Kashkari that increasing interest could trigger a recession, dollar doves are alive and vocal. We believe they will prevail enough to block some additional hikes. We are seller of USD in the mid-run against high yielding emerging market and G10 currencies.
Last week meeting the Fed voted for a 0.25% hike and increased its 2018 real GDP forecast, reflecting the boost of tax reform. Yet the policy projections were left broadly unchanged.