October Global Macro Monthly - Tighter global financial conditions

Key points

• Monetary policy continues to tighten across the globe as inflation remains far too elevated and is broadening from headline to core measures.
• Economies continue to slow in the face of tightening conditions and deteriorating real incomes for corporates and households. The UK looks likely to be in recession from Q3, as do some Eurozone economies. The US may not see recession begin this year.
• The UK has seen the downfall of its Prime Minister after the latest market havoc. Italy’s new government appears to have learnt from the UK’s travails. China’s Congress reiterated development as a priority. We await US midterms on 8 November.
• Financial markets across the globe cope with tightening financial conditions. Sharp rises in US real yields and the dollar are symptomatic. Credit and equity markets have seen material adjustments but may not be fully priced for expected recessions.