• Trade war Trumps all
• Growth slowdown to intensify in Q2 and Q3
• Fed now pushed into two rate cuts in 2019, RMB to break 7 vs USD
• Despite the constant noise US and EM stocks are still too richly priced

• Trade growth returns as inventories re-stock
• Asia trading bloc is forming
• China processing trade under severe pressure

Economics: Fed’s summer vacation is cut short

• Employment data reflect weakening activity
• Trump’s tariff war with China lowers inflation expectations
• Fed to cut rates in June?

Markets: Powell polishes his put

• After Powell’s remarks, rate markets now discount multiple Fed cuts
• Equities have rallied, perhaps a sign of investors’ trust in the Powell put
• But the reaction in the two markets is not entirely consistent

Politics: Bullying Mexico

• Trump advances on key political goals as he steps back from the brink
• Senate Republican rift sets outside limits to presidential overreach
• Looking ahead, watch legal challenges to “Remain in Mexico”

• We stick to our view that trade-war threats will be contained, BUT
• While the June G20 meeting may steady nerves, major risks remain
• This View is a glimpse over the brink
• ‘Who’s No.1?’: now the key driver – trumping Trump’s agenda & tactics
• US v. China rivalry will fester into the 2020s even in the benign scenario
• A globalised world could shift to regional blocs, hurting equity values
• The short-term danger of the trade-war negotiations derailing is high
• Failure to extend the Huawei truce in August could ruin scope for a deal
• If so, the world economy could tip rapidly into recession