Growth and inflation risks more balanced - Jul. EM/DM Leading Indicator Watch

There are limited signs that the “Liberation Day” tariff shock has meaningfully pushed up inflation or weighed on growth in most major DM and EM economies. Leading indicators suggest growth and inflation risks are balanced over the coming months. Meanwhile, the global easing cycle remains a tailwind for risk assets. We still like selective long exposure in Brazilian and Indian equities, as well as long KRW (vs CNH) and long CAD (vs CHF). We are waiting for data releases next month to confirm an overweight allocation to risk assets.

Summary by Country:

• UK: Recession remains in play, short-term Gilt yields heading lower
• Japan: Inflation pressures cooling, but move on from JGB flattener given global factors
• Switzerland: Deflationary pressures persist, still waiting on SNB intervention
• Canada: Stick with long CADCHF as growth concerns are overdone
• India: Stay long equities amid RBI easing, strong growth, and low inflation
• Brazil: Concerns about growth and politics could be chances to add long equity exposure
• Mexico: Yields biased lower, but outlook turning stagflationary
• South Korea: Fiscal boost, improving credit => still bullish KRW, wait to buy equities on dip