Marketing communication 04 April 2024
The bigger 'Bigger Picture'
Global Daily
RaboResearch Market comments
Global Economics &
Markets Fed Chair Powell noted the FOMC will wait for a clearer signal from the data before starting
mr.rabobank.com rate cuts, which he continues to expect to begin “at some point this year.” In particular, he said
that recent inflation data have not “materially changed” the bigger picture.
Michael Every
Global Strategist
Battered bonds liked that message, bull flattening the curve; the US dollar, however, continues
to batter many EM (and DM) FX, requiring higher, not lower, rates in response. Gold shone slightly
brighter at a brief new high of $2,300, while Brent just failed to get back to a 9 handle at $89 and
change at its intra-day high.
The latest data Powell dismissed were mixed. ADP employment was 183K vs. 150K expected,
with a 10% y-o-y wage gain seen for job switchers: I recall a bond bull telling me in 2021 that they
would believe inflation was back only if we got real pay-rises. Yet the ISM services survey was
softer than expected and its prices paid component dipped to its lowest for four years and the
employment sub-index remained below 50, showing job losses. That’s as goods inflation seemed
to loom according to this week’s US ISM manufacturing survey. To summarise, there was no
material change to a US big picture which doesn’t make a lot of sense to many observers.
Meanwhile, in Europe the opposite above-target CPI dynamic was confirmed, where services were
stubbornly high at 4% y-o-y and the only crutch was goods deflation in food (not energy, which
often drives food prices with a lag), and some industrial products (i.e., imports from China). Yet
despite that big picture, the ECB has been even more dovish than the Fed in its recent statements.
Central banks are obviously determined to cut – or to make you think they are going to cut.
It’s hard not to notice that rococo gilded frame if you take a step back to take it all in – which
gold is very obviously doing. Yet the bigger ‘big picture’ is arguably that short of an economic
downturn that no central bank expects, cutting rates could perhaps risk triggering a material,
inflationary move higher in asset and commodity prices. Indeed, if real demand is going to pick
up, which is the point of lower rates; and if financial speculation is going to pick up, which is why
the market is focused on lower rates; and if the supply of some key goods and commodities is
going to be an issue, then how does that rate-cuts = higher supply-side inflation backdrop not
risk transpiring?
It would cause a major market shock if rate cuts didn’t happen; or if rates were cut anyway
“because reasons/debt sustainability/populism slash elections.” But just because central
banks can’t say this, as it would show the limits of what they can and can’t do in the real world,
and those in markets who want higher asset prices obviously won’t, doesn’t mean it can’t
hypothetically be the case. Indeed, the real world is still out there, and it’s very real right now.
Nick Timiraos, the Wall Street Journal Fed Whisperer, shares otherwise obscure Dallas Fed
research (‘Lower interest rates don’t necessarily improve housing affordability’) showing housing
affordability would also have worsened since 2022 if the Fed hadn’t hiked, because home prices
would have gone up more: so while higher rates made unaffordability even worse, the
alternative, via lower rates, is still going to be higher house prices – which is inflationary in
multiple ways. And you heard that argument here first, every few weeks for the past few years,
by the way – and it applies to all Western economies, not just the US. (**cough** Australia **
cough**)
1/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024, 10:09
Please note the disclaimer at the end of this document.
US Treasury Secretary Yellen told China the US is going to “shield new industries” against it. So,
US protectionism / mercantilism / industrial policy, another long-time call here, which is
inflationary even before we get any ‘Trump Tariffs’.
Relatedly, The Hill has a (very political/lobby-friendly) op-ed underlining government regulation,
however well-intended, can be inflationary: in this case, they suggest recent measures to
remove ‘forever chemicals’ from US water supplies could push up the price per household by
$3,000 annually.
China’s restrictions on exports of gallium are pushing prices up to the highest since 2011.
Taiwan’s earthquake has disrupted chip production at TSMC: this may only be a blip, but it
underlines how despite talk of supply-chain resilience, some key products still flow from very
few hands.
In the Middle East, talk is of the risks of war between Israel and Hezbollah, and that Iran might
respond to the recent attack on its Damascus consulate with an outright attack on Israel from its
own territory, triggering a response in kind. Israel is now calling up reservists to its air defence
units, underlining the perceived threat. Such inflationary fat tails would wag many central banks
if seen.
On oil, OPEC+ supply restrictions are to stay; reports say 14% of Russia’s refining capacity has
been taken out by Ukrainian attacks so far; and the US has had to back off plans to refill its
Strategic Petroleum Reserve because prices are now too high - so it doesn’t have much of an
SPR the next time it might need it.
Cocoa continues to be the new crypto, as Arabica coffee is trying to copy its beverage friend
short term, with very low world stocks.
Finally, in a related bigger picture of far more importance to central banks and financial markets
than either wants to admit, the US is hardly inspiring geopolitical shock and awe in those willing
to deliberately restrict supply of key goods and commodities to ensure the West can’t play the
‘low-rates/QE, and you give us your stuff’ game again. US President Biden’s on/off frailties are
hardly news, but now…
US National Security Adviser Sullivan has postponed a planned trip to Saudi Arabia to
discuss Saudi normalization with Israel, because he cracked his own rib in a "minor accident
of his own" which "was not caused by anybody." Which sounds like the kind of things that the
White House press secretary keeps having to say.
US Secretary of State Blinken was forced to abandon his Boeing 737 plane due to another
technical issue with it, and instead take a long drive to a key NATO meeting. Our Fed-watcher
Philip Marey, as sharp with his wits as he is with his Fed calls, quipped that perhaps reporters are
stealing parts from official White House planes now, not just memorabilia.
Day Ahead
Following the RBA message yesterday that the only thing that is certain is that nothing is certain--
apart from higher house prices(?)-- as some put it in the local press, today saw the Reserve Bank
stress it thinks SMEs could drive the productivity turnaround the country needs to get inflation
down. (And rates down; and house prices further up.) Apparently, SMEs are spending 25% more
on R&D than large firms(!)
Next today it’s global services PMIs, US Challenger job cuts, the ECB’s account of the March rate
decision, the US trade balance, the same in Canada, and US initial jobless claims.
In terms of central banks, we get the Fed’s Harker, Barkin, Goolsbee, Mester, Kashkari, Musalem,
and Kugler. We certainly have inflation in central-bank speakers!
For an overview of our macro-economic and financial markets forecasts please click here.
2/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024 10:09
Please note the disclaimer at the end of this document.
RaboResearch
Global Economics & Markets
mr.rabobank.com
Global Head
Jan Lambregts
+44 20 7664 9669
Jan.Lambregts@Rabobank.com
Macro Strategy
Global
Michael Every
Senior Macro Strategist
Michael.Every@Rabobank.com
Europe
Elwin de Groot Bas van Geffen Stefan Koopman
Head Macro Strategy Senior Macro Strategist Senior Macro Strategist
Eurozone, ECB ECB, Eurozone UK, Eurozone
+31 30 712 1322 +31 30 712 1046 +31 30 712 1328
Elwin.de.Groot@Rabobank.com Bas.van.Geffen@Rabobank.com Stefan.Koopman@Rabobank.com
Erik-Jan van Harn Maartje Wijffelaars
Macro Strategist Senior Economist
Germany, France Italy, Spain, Portugal, Greece
+31 6 300 20 936 +31 88 721 8329
Erik-Jan.van.Harn@Rabobank.nl Maartje.Wijffelaars@Rabobank.nl
Americas
Philip Marey Christian Lawrence Mauricio Une
Senior Macro Strategist Senior Cross-Asset Strategist Senior Macro Strategist
United States, Fed Canada, Mexico Brazil, Chile, Peru
+31 30 712 1437 +1 212 808 6923 +55 11 5503 7347
Philip.Marey@Rabobank.com Christian.Lawrence@Rabobank.com Mauricio.Une@Rabobank.com
Renan Alves Molly Schwartz
Macro Strategist Cross-Asset Strategist
Brazil
+55 11 5503 7288 +1 516 640 7372
Renan.Alves@Rabobank.com Molly.Schwartz@Rabobank.com
Asia, Australia & New Zealand
Teeuwe Mevissen Benjamin Picton
Senior Macro Strategist Senior Macro Strategist
China Australia, New Zealand
+31 30 712 1509 +61 2 8115 3123
Teeuwe.Mevissen@Rabobank.com Benjamin.Picton@Rabobank.com
3/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024 10:09
Please note the disclaimer at the end of this document.
FX Strategy
Jane Foley
Head FX Strategy
G10 FX
+44 20 7809 4776
Jane.Foley@Rabobank.com
Rates Strategy
Richard McGuire Lyn Graham-Taylor
Head Rates Strategy Senior Rates Strategist
+44 20 7664 9730 +44 20 7664 9732
Richard.McGuire@Rabobank.com Lyn.Graham-Taylor@Rabobank.com
Credit Strategy & Regulation
Matt Cairns Bas van Zanden Paul van der Westhuizen
Head Credit Strategy & Regulation Senior Analyst Senior Analyst
Covered Bonds, SSAs Pension funds, Regulation Financials
+44 20 7664 9502 +31 30 712 1869 +31 88 721 7374
Matt.Cairns@Rabobank.com Bas.van.Zanden@Rabobank.com Paul.van.der.Westhuizen@Rabobank.com
Cas Bonsema
Senior Analyst
ABS, Covered Bonds
+31 6 127 66 642
Cas.Bonsema@Rabobank.com
Agri Commodity Markets
Carlos Mera Michael Magdovitz Paul Joules
Head of ACMR Senior Commodity Analyst Commodity Analyst
+44 20 7664 9512 +44 20 7664 9969 +44 20 7887 824436
Carlos.Mera@Rabobank.com Michael.Magdovitz@Rabobank.com Paul.Joules@Rabobank.com
Energy Markets
Joe DeLaura Florence Schmit
Senior Energy Strategist Energy Strategist
+1 212 916 7874 +44 20 7809 3832
Joe.DeLaura@Rabobank.com Florence.Schmit@Rabobank.com
4/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024 10:09
Please note the disclaimer at the end of this document.
Client coverage
Wholesale Corporate Clients
Martijn Sorber Global Head +31 30 712 3578 Martijn.Sorber@Rabobank.com
Hans Deusing Europe +31 30 216 9045 Hans.Deusing@Rabobank.com
Neil Williamson North America +1 212 808 6966 Neil.Williamson@Rabobank.com
Adam Vanderstelt Australia, New Zealand +61 2 8115 3102 Adam.Vanderstelt@rabobank.com
Ethan Sheng Asia +852 2103 2688 Ethan.Sheng@Rabobank.com
Ricardo Rosa Brazil +55 11 5503 7150 Ricardo.Rosa@Rabobank.com
Financial Institutions
Short-term Interest Rates
Marcel de Bever Global Head +31 30 216 9740 Marcel.de.Bever@Rabobank.com
Bonds & Interest Rate Derivatives
Henk Rozendaal Global Head Fixed Income +31 30 216 9423 Henk.Rozendaal@Rabobank.com
Solutions
Sjoerd van Peer Global Head +31 30 216 9072 Sjoerd.van.Peer@Rabobank.com
Relationship Management
Rogier Everwijn Global Head +31 30 712 2440 Rogier.Everwijn@Rabobank.com
Rob Eilering Banks +31 30 712 2162 Rob.Eilering@Rabobank.com
Petra Schuchard Insurers Petra.Schuchard@Rabobank.com
Frank Dekkers Asset Managers Frank.Dekkers@Rabobank.com
Javier Alvarez de Eerens MDB +31 30 712 1015 Javier.Alvarez@Rabobank.com
Christel Kleinhaarhuis Fintech Christel.Klein.Haarhuis@Rabobank.com
Capital Markets
Laura Bijl Global Head +31 88 726 3254 Laura.Bijl@Rabobank.com
Christopher Hartofilis Capital Markets USA +1 212 808 6890 Christopher.Hartofilis@Rabobank.com
Ian Baggott Capital Markets Asia +852 2103 2629 Ian.Baggott@Rabobank.com
Willem Kröner Global Head ECM +31 30 712 4783 Willem.Kroner@Rabobank.com
Harman Dhami DCM Syndicate +44 20 7664 9738 Harman.Dhami@Rabobank.com
Crispijn Kooijmans DCM FIs & SSAs +31 30 216 9028 Crispijn.Kooijmans@Rabobank.com
Bjorn Alink DCM Securitisation & +31 30 216 9393 Bjorn.Alink@Rabobank.com
Covered Bonds
Othmar ter Waarbeek DCM Corporate Bonds +31 30 216 9022 Othmar.ter.Waarbeek@Rabobank.com
Joris Reijnders DCM Corporate Loans +31 30 216 9510 Joris.Reijnders@Rabobank.com
Brian Percival DCM Leveraged Finance +44 20 7809 3156 Brian.Percival@Rabobank.com
5/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024 10:09
Please note the disclaimer at the end of this document.
Disclaimer
Non Independent Research
This document is issued by Coöperatieve Rabobank U.A. incorporated in the Netherlands, trading as “Rabobank”
(“Rabobank”) a cooperative with excluded liability. The liability of its members is limited. Authorised by De
Nederlandsche Bank in the Netherlands and regulated by the Authoriteit Financiële Markten. Rabobank London
Branch (RL) is authorised by De Nederlandsche Bank, the Netherlands and the Prudential Regulation Authority,
and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation
Authority. Further details are available on request. RL is registered in England and Wales under Company no. FC
11780 and under Branch No. BR002630. This document is directed exclusively to Eligible Counterparties and
Professional Clients. It is not directed at Retail Clients.
This document does not purport to be impartial research and has not been prepared in accordance with legal
requirements designed to promote the independence of Investment Research and is not subject to any
prohibition on dealing ahead of the dissemination of Investment Research. This document does NOT purport to
be an impartial assessment of the value or prospects of its subject matter and it must not be relied upon by any
recipient as an impartial assessment of the value or prospects of its subject matter. No reliance may be placed by
a recipient on any representations or statements made outside this document (oral or written) by any person
which state or imply (or may be reasonably viewed as stating or implying) any such impartiality.
This document is for information purposes only and is not, and should not be construed as, an offer or a
commitment by RL or any of its affiliates to enter into a transaction. This document does not constitute
investment advice and nor is any information provided intended to offer sufficient information such that is
should be relied upon for the purposes of making a decision in relation to whether to acquire any financial
products. The information and opinions contained in this document have been compiled or arrived at from
sources believed to be reliable, but no representation or warranty, express or implied, is made as to their
accuracy, completeness or correctness.
The information contained in this document is not to be relied upon by the recipient as authoritative or taken in
substitution for the exercise of judgement by any recipient. Any opinions, forecasts or estimates herein
constitute a judgement of RL as at the date of this document, and there can be no assurance that future results
or events will be consistent with any such opinions, forecasts or estimates. All opinions expressed in this
document are subject to change without notice.
To the extent permitted by law, neither RL, nor other legal entities in the group to which it belongs accept any
liability whatsoever for any direct or consequential loss howsoever arising from any use of this document or its
contents or otherwise arising in connection therewith.
Insofar as permitted by applicable laws and regulations, RL or other legal entities in the group to which it
belongs, their directors, officers and/or employees may have had or have a long or short position or act as a
market maker and may have traded or acted as principal in the securities described within this document (or
related investments) or may otherwise have conflicting interests. This may include hedging transactions carried
out by RL or other legal entities in the group, and such hedging transactions may affect the value and/or liquidity
of the securities described in this document. Further it may have or have had a relationship with or may provide
or have provided corporate finance or other services to companies whose securities (or related investments) are
described in this document. Further, internal and external publications may have been issued prior to this
publication where strategies may conflict according to market conditions at the time of each publication.
This document may not be reproduced, distributed or published, in whole or in part, for any purpose, except with
the prior written consent of RL. By accepting this document you agree to be bound by the foregoing restrictions.
The distribution of this document in other jurisdictions may be restricted by law and recipients of this document
should inform themselves about, and observe any such restrictions.
A summary of the methodology can be found on our website
© Rabobank London, Thames Court, One Queenhithe, London EC4V 3RL +44(0) 207 809 3000
6/6 RaboResearch | The bigger 'Bigger Picture' | 04-04-2024 10:09
Please note the disclaimer at the end of this document.
