All right, let's get to our guess now it's definitely holds yen ce io apack at Deutsgia Bank International private bank, and pick up there on what we are seeing with the energy crisis deepening in Europe and leaders really scrambling to deal with that. How much of it is a concern here is that this could push us into a
global recession. There's a lot of concern of course, UM, maybe not in regards to a global recession right away, but for sure if we look at Europe, we have been working on the assumption so far that Russia would not switch off nord stream UM forever, you know, not giving away this leverage they had in their hands. But now it's been made quite clear that they have been UM connecting the sanctions to their inability to repair and time.
And therefore, um, you know, we have to assume that maybe that pipeline um techniqual isia will persist and we won't get North Stream back to where it was before, which was already be low capacity. So so far, UM, our assumption was that we may have a mild recession in Europe. But of course if um you know the underlying UM assumption on that changes. Um, it will look like more of a severe recession scenario. And of course that's very wearing. And of course yes it has global implications. UM.
China is the main trading partner to Europe. UM. If EU rober sliding into recession, Um, not just China, you're the U S. Everybody else will of course be impacted. What does it mean for the A c B. You're saying they will continue with rad hikes here. Yes, well, we are already have seen quite a reprising last week UM on the E c B, more on the back of UM Council official commentary than what has transpired over the weekend on the energy side. But I guess it's
just this energy situation is just exacerbating the problem. Um. UM, So seventy five um, sorry, seventy five basis points hike look very much on the card on Thursday, and UM, well they have been stepping off their forward guidance. But we would expect to get a bit of a clearer idea on Thursday as towards the path ahead. Most probably that would be more on the hawker side, all right. And moving to the FED now as well, you're saying they're expecting to remain hawkish when we look at what
we saw in their jobs numbers. I mean, it's still a pretty strong labor market, still a very strong dollar as well. How much further tightening do you expect from the Fed? You well, to be honest, I saw some of soft lending hints as well in these labor market report. But then of course the drolls data show still strong
drop opening. So you have that mixed bag. And given what we learned, the Jackson home was probably as much as one lower CPI print also a bit of a softer data set um from from the employment market, most probably won't derail the FED from their path to just frontload as much as they can there it hiking path. Well, we have a bit of more commentary ahead of the CPI next week on the thirteen UM out of the US before we go into blackout and then into the
next f WORMS meeting on the twenty one. But I guess that repricing is uh has happened, and its correct to assume there will be more coming and more hawker is tonality from the FED um as we see data stay that way and not convincingly shift the other way around. So we saw about a four percent drop in the SMP five in August, following that big drop that we saw in June as well, which was kind of a guess reversed by those July gains. Where do we trade for the rest of the year. I know that you're
positive on energy and healthcare. Yes, Um, Actually, Um, there is a fine balancing act of course that we'll need to be delivered by the FED, but so far we're still working on the basis that it will be only a mild resaction, and consequently, also the asset um reprisings that will have to happen won't see um, you know, massive sell offs. Then of course, UM almost probably have a difficulty t recover before we see the reality kicking
in with the October earnings from the US. I think the market is very well expecting that those will have more of a reality check in regards as to how the economy is doing. China is going to accelerate its stimulus rollout in the third quartermaking moves to defend the one as well. When do we see a tipping point
for better growth recovery in China? Well, that that's an excellent question, you know, UM, We've been talking to each other over the past month, and I've been always a bit more optimistic on China compared to the rest of
the street. UM look like that the global headwinds and also all the news around the property sector has been depressing sentiment again UM on asset prices and UM of course UM with the incoming data being still depressed because of the COVID policy being followed to the you know, to the strangest requirements. It's UM. It's a situation where most probably we will have to defer this view of getting more cautiously optimistic into the fourth quarter rather than
the third quarter. But I think because UM, you know, we have been opening a bit more positive today and I think it's really down to UM the resolve from China. We had these news that they totally understand they need to put everything in the third quarter or as much as possible in terms of the infrastructure and fiscal support
their planning. They have already had lower interest rates before, and now they've also shown us that with UM taking the reserve requirement for ethics deposits down from eight to six percent, that they're also showing resolve and not letting the yuan depreciate to an extent that this will have more UM outflows out of the country. What do you think in terms of whether or not it's it's right to invest into China heading into the latter part of
the year. Morgan Stanley saying yesterday they expect consensus earnings downgrades to continue into the fourth quarter. Yeah, well, if you haven't been invested in China at all, there's obviously a few sectors to um UM to not look into, for instance, properties UM and then UM. It's important to UM start scaling in UM in a cautious way. You're
cautious manner. But if you have been investing so far as we have been doing for our clients for instance, we're just looking for opportunities and we keep in liquid alternostitatives to be able to to make those moves. So it's UM that turning point everybody is waiting for most probably it doesn't come at a switch. It is something that you have to, you know, approach UM step by step, and these valuations obviously already are quite interesting. We are
waiting to see Japan fully open to tourism. I mean, that's something that I think the world is kind of opening waiting for the end One forty I think Goldman SAX saying could get to one forty five. How attractive a Japanese equies. Yeah, we have recently and that is a very technical UM notion. UM actually taken up and overweight in the Japanese equity sector. UM and at the same time having reduced that A X J overweight we had before UM, just in terms of timings to to
look at. You know, if especially the end trajectory stays the way it is, most probably it's something that will benefit that equity outlook even more. And then as we heard already, we have all these news in terms of reopening. It's cautious, of course, but it looks like we would see a different style in terms of COVID management going forward and the tourism to be able to pick up on the back of it. What's the Australia picture look
like for you? We're looking at potentially a fourth half point high from the RBA, but there's been in some pretty strong company earnings there well personally, UM, that's uh, you know, we're just ahead of that decision that I was actually expecting. UM. Given that the A B A A B A has already UM guided us that maybe they take the foot of the paddle a little bit, um that this won't be a fifty basis points hike, but maybe less. But maybe it's fifty basis points with
the according language around it. So I also, as you said, you know, earnings are in a different are coming in slightly strong. We had already quite a sizeable correction on the housing market. You know, maybe now is the time in the light of this to um go off the paddle a little bit and very excited to see how it will turn out today. All right, thank you so much as always for your time. Stephanie Holtz and ce io a pack at dertgea bank international private bank with US