Supportive growth and liquidity - Sep. EM/DM Leading Indicator Watch

Tailwinds are intact for risk assets from growth, policy and liquidity, and our liquidity-driven regime model still favors EM assets over DM. Local conditions are starting to matter again as we are seeing divergent leading indicator outlooks within different DM and EM economies. We are adding short CNHINR based on an LPPL sell signal and the strong cyclical backdrop in India.

Summary by Country:

• UK: Inflation sticky above target but real yields now offer value
• Japan: More signs of peak inflation, more yen weakness ahead
• Canada: Labor market fears priced in, stick with long CADJPY
• New Zealand: Growth and inflation LEI resilient, RBNZ expectations too dovish
• India: Strong growth, low inflation => stick with equities, short CNHINR on LPPL bubble
• Brazil: Falling inflation and growth headwinds to spur more BCB easing
• Indonesia: Growing signs of asset price dislocation amid political tensions
• South Korea: Improving growth outlook, but low carry could weigh on KRW