Eurozone Periphery Still at Risk

The cyclical recovery in Europe is real and will likely have further to go in the second half of this year. However, amid upbeat cyclical indicators, it is important to keep a close eye on developments in the periphery and in particular Spain. The process of clearing bad debts is far from over in our view and the idea that Spain has, “turned the corner” lacks logic and evidence.

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Earnings to weigh on US equities

Most of the talk on US equities is still centered around whether and when the Fed will start scaling back its asset purchases (let alone start raising rates). The point here is of course that if the Fed decides to remove the punchbowl, equities will take a dim view.

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Industrial Production Recovers in Brazil amid Gloomy Sentiment

Our leading indicator for Brazil continues to imply significantly higher growth in Brazil and the economy is starting to respond. Of course, recent positive growth surprises have taken a backseat to the increase in EM market volatility . The Brazilian real has weakened, equities have sold off and yields have risen driven by a rise in US 10y yields. That together with a hawkish central bank has added to the squeeze on economic activity.

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