October Global Macro Monthly -Geopolitics and yield add to macro uncertainty
- 25 October 2023 (10 min read)
Key points
- Terrorist attacks in Israel and retaliation in Gaza has created the threat of a humanitarian crisis, with risks of regional conflict escalation. Market reaction has been cautious to date, but risks are obvious.
- Meanwhile global bond yields continue to rise, driven by a rise in US Treasuries. Technical features appear to be compounding this rise, including the re-emergence of term premium as quantitative tightening continues.
- Yet macro drivers of yields are also compelling, particularly in the US where consumer resilience and solid investment has lifted future interest rate expectations.
- China posted stronger Q3 GDP growth, with consumer activity recovering. This likely secures this year’s growth target, yet property remains a risk and ongoing momentum next year requires more stimulus.
- Eurozone growth prospects remain more stagnant, but fiscal concerns dominate as the budget process and higher yields challenge certain governments.
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