May 18, 2025 06:00 AM GMT Sunday Start | What's Next in Global Macro M Global Idea The Détente – What It Does and Doesn't Mean Following Monday's announcement of a 90-day pause on reciprocal tariffs between the US and China, the response in risk markets has been resoundingly positive through the first four trading days. The S&P 500 is up 4.5% from last Friday's close, and year-to-date returns are back in the black after Liberation Day drove steep declines in April. Credit markets have also rallied notably, ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Hong Kong Dollar (HKD) and its exchange rate dynamics against the US Dollar (USD) within the context of the linked exchange rate system (LERS) maintained by the Hong Kong Monetary Authority (HKMA) [3][7]. Core Insights and Arguments 1. **Recent Market Developments**: - In April, the USD/HKD spot approached the lower bound of the peg (7.75) due to a weakening dollar and the announcement of US tariffs. The HKD appreciated sharply in early May, hitting the lower bound multiple times, prompting HKMA intervention to sell HKD and buy USD, which increased interbank liquidity and lowered HKD interest rates [3][7]. - The current USD/HKD spot is trading around 7.8440, influenced by a significant US-HK interest rate differential of approximately 300 basis points for the 3-month LIBOR-HIBOR spread [3][15]. 2. **HKD Peg Mechanism**: - The HKD operates within a tight band of 7.75-7.85 against the USD, with the HKMA intervening to maintain this peg by buying or selling currencies as needed [3][7]. 3. **Liquidity Injection Effects**: - The HKMA's actions have more than tripled the Aggregate Balance to approximately HK$174 billion, leading to a significant drop in short-term interest rates, particularly the 1-month HIBOR, which was fixed at 0.87% on June 3, down from around 4% in late April [3][7][13]. - The 3-month HIBOR also fell below 1.4% in late May, indicating a substantial reduction in borrowing costs, which is expected to support the local economy and property market [3][7][13]. 4. **Market Implications**: - The decline in interest rates is closely monitored by equity investors, particularly in interest-sensitive sectors like banking and property. The report highlights that long USD/HKD forwards are yielding record high annualized carry returns, with short-term FX forwards offering returns above 4% annualized for 1-month forwards [3][8][18]. - If the USD/HKD spot reaches the upper bound (7.85), the HKMA would likely drain liquidity, potentially increasing HIBOR rates. Conversely, a weaker USD or renewed HKD inflows could keep the spot off the upper bound [3][8][18]. Additional Important Content - The HKMA's issuance of Exchange Fund Bills and Notes (EFBNs) is noted as a liquidity management tool, with no immediate plans to drain excess liquidity, which could further support lower interest rates [3][7][8]. - The report emphasizes the importance of monitoring the dynamics of USD/HKD spot movements, as they will significantly influence future interest rate trends in Hong Kong [3][8]. This summary encapsulates the critical aspects of the HKD's current market situation, the implications of HKMA's interventions, and the broader economic context affecting interest rates and investment opportunities in Hong Kong.

Investment Rating - The report recommends an overweight (OW) position in emerging market (EM) foreign exchange (FX), an underweight (UW) in EM sovereign credit, and a market weight (MW) in EM local rates and corporates [5][14][25]. Core Insights - The US policy uncertainty continues to drive the EM outlook in the second half of 2025, with EM currencies expected to perform well in a slower growth, no-recession scenario [5][14]. - The projected global GDP drag from higher tariffs has been reduced following US-China détente, but remains significant, with global growth expected to slow to 1.3% annualized in H2 from 2.4% in H1 [29][30]. - EM monetary easing is ongoing despite a hold by the Federal Reserve, supported by domestic conditions and looser financial stability constraints [5][38]. Summary by Sections Executive Summary - The impact of US trade policy is expected to be more detrimental to the US than to EM, allowing EM local markets to continue performing well [14]. - The report suggests a neutral stance on EM fixed income assets, adjusting previous expectations of increased volatility and risk premia [14][22]. EM Local Markets Strategy - EM FX is positioned as OW, with a preference for currencies from EM Asia and Central and Eastern Europe (CEE) [5][25]. - Local bonds are rated MW, with a focus on short-end receivers in specific countries like Israel and South Korea [5][25]. EM Sovereign Credit Strategy - The report maintains an UW stance on the EMBIGD index due to asymmetric spread outcomes, favoring specific countries like Cote D'Ivoire and Romania while remaining cautious on Brazil and Serbia [5][25]. EM Corporate Strategy - The report holds a MW rating for EM corporates, noting steady fundamentals and technicals, but highlights historically low CEMBI spreads at 230 basis points [5][25].

Core Insights - Goldman Sachs (GS) reaffirmed its leading position in announced and completed mergers and acquisitions (M&A) in Q1 2025, highlighting its strength in investment banking despite sector challenges [1][9] - The firm is strategically exiting non-core consumer banking to focus on high-margin investment banking and trading operations [1][9] Company Developments - Goldman Sachs received a proposal from Apple to end their consumer banking partnership, potentially concluding before the contract expiration in 2030 [2] - In 2024, Goldman transferred its GM credit card business to Barclays and sold its home-improvement lending platform, GreenSky, alongside divesting its Personal Financial Management unit in 2023 [2] Market Conditions - Anticipated resurgence in M&A for 2025 has been delayed due to market volatility from tariff proposals and persistent inflation, with recovery expectations pushed to the second half of 2025 [3] - Despite stabilizing interest rates and strong corporate cash positions, companies are adopting a cautious approach to deal activity amid economic uncertainty [3] Financial Performance - Goldman Sachs' investment banking revenues fell 8% year-over-year in Q1 2025, but a growing backlog of advisory work suggests a potential rebound when market conditions improve [4][9] - GS shares have increased by 5.7% year-to-date, compared to the industry's growth of 8.9% [7] Competitor Analysis - JPMorgan (JPM) remains a strong competitor, with its investment banking fees growing 12% year-over-year to $2.18 billion in Q1 2025, driven by advisory fees and debt underwriting income [5] - Morgan Stanley (MS) has seen an 8% increase in investment banking revenues in Q1 2025, while diversifying into more stable revenue sources [6] Valuation and Estimates - Goldman Sachs trades at a forward price-to-earnings (P/E) ratio of 12.78X, below the industry average of 13.61X [11] - The Zacks Consensus Estimate for GS's earnings implies year-over-year growth of 9.6% for 2025 and 13.1% for 2026, with estimates remaining unchanged over the past 30 days [13]

Investment Rating - The report suggests a modest impact on corporate earnings and cash flows from the budget reconciliation bill, estimating a boost of around 5% for the S&P 500 in the next year [1][2]. Core Insights - The budget reconciliation bill is expected to have only a modest effect on the US fiscal balance and corporate earnings, with potential earnings boosts diminishing in subsequent years [1][2]. - The ECB is anticipated to cut rates by 25 basis points, with growth forecasts remaining unchanged at 0.9% for this year and a slight decline for next year [11]. - The report highlights the potential for renewed interest in European equities due to the Section 899 provision of the reconciliation bill, which may create uncertainty for US investments [2][5]. Fiscal Policy Focus - The budget reconciliation bill is projected to have limited effects on migration and economic activity, particularly for high-earning households [5]. - Fiscal policy in China is expected to support growth, with an estimated boost of 1.1 percentage points to real GDP growth this year [6]. ECB Projections - The ECB's growth forecast for this year is expected to remain at 0.9%, with a slight decline in next year's forecast [11]. - Inflation projections are likely to be downgraded, with headline and core inflation expected to decline to 1.7% and 1.8% respectively for next year [11]. US Jobs Report - The report estimates a below-consensus increase of 110,000 in nonfarm payrolls for May, with an unchanged unemployment rate of 4.2% [16]. - Average hourly earnings are forecasted to increase by 0.3% month-over-month [16]. Steel and Aluminum Tariffs - The doubling of US steel and aluminum tariffs to 50% is expected to negatively impact US steel demand from the manufacturing sector [16]. - There is a potential risk of tariffs being imposed on copper imports, which is currently underpriced in the market [16].

3 June 2025 | 9:27AM EDT US Monthly Inflation Monitor: May 2025: The Tariff Boost Remains Small for Now but Should Rise From Here (Rindels) Goldman Sachs & Co. LLC n Recent inflation trends: n Factors influencing core goods prices: Jan Hatzius +1(212)902-0394 | Goldman Sachs & Co. LLC Alec Phillips +1(202)637-3746 | Goldman Sachs & Co. LLC David Mericle +1(212)357-2619 | david.mericle@gs.com Goldman Sachs & Co. LLC Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Manuel Abecasis ...

Investment Rating - The report indicates a real GDP growth forecast for China of 4.6% in 2025, revised from 4.0% due to changes in US tariffs and economic conditions [3][4]. Core Insights - There has been no significant shift from external to domestic demand in China's economy, with exports remaining strong despite higher US tariffs [3][8]. - Retail sales growth has improved, largely driven by a government-subsidized consumer goods trade-in program, with some categories seeing sales growth exceeding 20% year-on-year [11][8]. - The property sector has shown signs of weakness, with new property starts down approximately 75% from peak levels and property sales dropping by about 50% [16][21]. - The labor market is currently very weak, with employment sub-indices indicating significant slack, particularly in construction and small businesses [17][21]. - The Chinese Yuan (CNY) is expected to begin a multi-year strengthening path against the USD, as it is considered significantly undervalued [22][23]. Summary by Sections Economic Overview - The US effective tariff rate on Chinese goods is projected to remain around 40% for the remainder of the year, impacting growth forecasts [3][7]. - Despite higher tariffs, export volume increased by 13% year-on-year in April, indicating resilience in the export sector [3][8]. Retail Sector - Retail sales growth improved to 4.7% year-on-year in January-April 2025, compared to 3.5% in the same period of 2024, primarily due to the trade-in program [9][11]. Property Market - The property market has weakened, with new property starts and sales significantly declining, indicating a destocking process to clear excess inventory [16][21]. Labor Market - Employment indices from various PMIs show that the labor market is extremely weak, particularly in construction and small businesses, with many indices below the 5th percentile of historical performance [17][21]. Currency Outlook - The CNY is expected to strengthen against the USD, supported by undervaluation and competitive manufacturing factors, with a revised 12-month forecast of 7.00 for USDCNY [22][23][28].

Group 1 - American Trust Investment Services, Inc. (ATIS) is acting as the exclusive placement agent for Fly-E Group Inc. in its follow-on public offering [1][5] - The offering includes 28,595,553 shares of common stock and 57,191,106 warrants, with a public offering price of $0.2428 per share, aiming for gross proceeds of approximately $6.94 million [2] - Fly-E Group Inc. specializes in electric vehicles, focusing on smart electric motorcycles, e-bikes, scooters, and related accessories, and operates over 30 retail stores in the U.S. [3] Group 2 - The net proceeds from the offering will be allocated for inventory purchases, vehicle production, and general corporate purposes [4] - ATIS emphasizes its commitment to supporting high-growth companies like Fly-E, aiming to enhance their market leadership in sustainable mobility [5] - ATIS is recognized for providing tailored capital markets solutions and has a strong track record in guiding businesses through complex financial transactions [6]

Company Overview - Colliers has entered into a definitive agreement to acquire a controlling interest in Astris Infrastructure, LLC, enhancing its capabilities in infrastructure and energy transition [1] - Astris Finance has a strong presence with 65 professionals across nine offices globally, providing strategic and transaction advisory services in various sectors [2] - The acquisition is expected to close in the third quarter of 2025, subject to customary closing conditions [1] Strategic Importance - The partnership will significantly expand Colliers' investment banking capabilities, allowing better service to institutional clients and capitalizing on the growing demand for infrastructure [3] - Astris Finance has ranked among the top three financial advisors in the IJ Global Renewables League Tables, indicating its strong market position [2] - The collaboration aims to broaden advisory capabilities and unlock new opportunities for clients worldwide [3] Financial Metrics - Astris Finance has advised on over 400 transactions totaling more than $60 billion in investment [2] - Colliers manages over $25 billion in energy transition and infrastructure assets [3] - Astris Finance is currently working on a pipeline of 50+ M&A and financing deals representing an aggregate investment of more than $15 billion [6]

Financial Data and Key Metrics Changes - Stifel achieved record net revenues of $4.97 billion in 2024, the highest in the firm's history [14] - Non-GAAP earnings totaled $756 million, equating to $6.81 per share, reflecting a 46% increase from the previous year [15] - The return on tangible common equity was 22.7% on a non-GAAP basis, and the share price rose by 56.4% in 2024 [15] Business Line Data and Key Metrics Changes - Global Wealth Management revenue reached $3.3 billion, up from $3 billion in 2023, with asset management revenue increasing by 18% [24] - The Institutional Group generated $1.6 billion in revenue, a 30% increase from 2023, with investment banking revenue at $973 million, including a 24% rise in advisory revenue [29] - Stifel Bancorp closed the year with over $31 billion in assets, maintaining a conservative risk profile while expanding support for wealth and investment banking platforms [27] Market Data and Key Metrics Changes - The U.S. economy grew by 2.8% in 2024, despite inflation remaining above the Fed's target, ending the year at 2.8% [17] - The S&P 500 rose by 23.3% in 2024, while the NASDAQ increased by 28.6%, driven by gains in mega-cap tech and AI stocks [19] - In 2025, trade war headlines raised stagflation concerns, with the ten-year treasury yield hovering around 4.4% [20] Company Strategy and Development Direction - The company aims for long-term goals of $10 billion in revenue and $1 trillion in client assets, viewing these as milestones rather than endpoints [16] - Stifel is focusing on enhancing its AI capabilities to improve client service and operational efficiency, with a three-tier strategy for AI implementation [34][35] - The "One Stifel" initiative aims to unify client experiences across all business lines, emphasizing investment in training and leadership development [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the U.S. economy and the health of the markets, despite recent volatility [21] - The company acknowledges the shifting global trade landscape and aims to remain agile and disciplined in response to these changes [23] - Management highlighted the importance of technology in reshaping the industry and enhancing client service [23] Other Important Information - Stifel's annualized dividend increased by 10% from $1.68 to $1.84 per share, reflecting strong financial performance [15] - The firm was recognized for its advisor satisfaction, ranking number one in the J.D. Power study for the second consecutive year [26] Q&A Session Summary - There were no questions raised during the Q&A session [40]