The economic week ahead: Major US banks have kicked off the Q3 2022 earnings season, high inflation being stickier than expected and the ongoing 20th Party Congress in Beijing. What does this mean for investors? Discover the views of our experts in this Research Weekly. <\/p>\n\n
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Key take-aways<\/strong><\/p>\n\n <\/p>\n\n US banks: Credit in check, net interest income accelerating<\/strong><\/p>\n\n The major US banks have kicked off the Q3 2022 earnings season. Their earnings have beaten expectations as higher interest rates have fed into their business model. Credit costs remain benign, as consumers and businesses seem to be in a better shape than feared. Most major banks seem to be well prepared for a slowdown this time, as capital ratios remain healthy and share buy-backs have been postponed more for regulatory than for economic reasons. This week, many more results will come in from other parts of the economy. The many profit warnings we have seen so far suggest that there are more disappointments in store for us. <\/p>\n\n <\/p>\n\n US inflation: Steadfast hawkish Federal Reserve<\/strong><\/p>\n\n The overarching concern remains sticky inflation and the consequent willingness of the US Federal Reserve (Fed) to increase the federal funds target rate, even at the expense of economic growth. The latest print failed to show the expected improvement \u2013 at least not to the extent that would warrant the Fed to slow down its pace of interest-rate hikes. We have therefore adjusted our forecasts and now expect another 75bps hike in November, followed by another 50bps hike in December. This makes a more pronounced slowdown in economic activity inevitable. At a projected 0.5% growth rate in 2023, we are not far away from stagnation. <\/p>\n\n <\/p>\n\n The big impact of past interest-rate hikes on inflation is still yet to come.<\/p>David Kohl, Chief Economist<\/cite><\/blockquote>\n\n <\/p>\n\n China: 20th Party Congress offers no relief to economic risks<\/strong><\/p>\n\n Despite the risks right ahead of us, we need to keep an eye on the longer-term picture as well. The 20th Party Congress in Beijing gives us plenty of ideas about where China would like to be in five years time. The composition of the new cabinet, which will be unveiled this week, will give us more clues about the policy priorities going forward. <\/p>\n\n <\/p>\n\n For equity investors, we believe Xi\u2019s report continues to support our thematic preference for environment, mass consumption, and smart manufacturing.<\/p>Magdalene Teo, Fixed Income Research Asia & Richard Tang, Equity Research Asia<\/cite><\/blockquote>\n\n <\/p>\n\n The main goals of the 20th Party Congress seem to be the continuation of a previous policy stance. President Xi articulated his vision for China, with the primary objective of building China into \u201cbasic socialist modernisation\u201d by 2036 and \u201ca strong socialist modern country\u201d by the middle of this century through \u201chighquality development\u2019. There are no clear definitions for the terms he used, but we believe they suggest that China will still focus on economic growth and emphasise sustainable development more than a numerical target. Xi also urged his people to remain vigilant against external risks. Economic development remains a high priority, which is a relief for all. At the same time, national security is now given higher priority \u2013 as expected. We believe that there will be more policies on securing energy, goods, and supply chains in the future. <\/p>\n\n <\/p>\n\n Copper: A story of shortages and surpluses<\/strong><\/p>\n\n We will also keep an eye on the energy transition, this time from the perspective of copper demand, which will receive a major boost (see the \u2018Number of the week\u2019). The copper market has experienced one of its steepest sell -offs ever this year, with prices down as much as 35%. It reflects the shift from fears of supply shortages due to the war in Ukraine to concerns about demand destruction amid China\u2019s property plunge and rising global recession risks. The mood in the copper market has turned from bullish to bearish. Looking beyond the current cyclical environment, we see four structural forces shaping the copper market during the next two to three decades: the energy transition, China\u2019s demographics, slowing mine supply, and accelerating scrap supply. <\/p>\n\n <\/p>\n\n Conclusion for investors<\/strong><\/p>\n\n In the meantime, we remain engaged in the markets, preferring large caps over small caps. <\/p>\n\n <\/p>\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" The economic week ahead: Major US banks have kicked off the Q3 2022 earnings season, high inflation being stickier than expected and the ongoing 20th Party Congress in Beijing. What does this mean for investors? Discover the views of our experts in this Research Weekly. Key take-aways US banks have kicked off the earnings season. 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