EPV

Japan's August CPI was unsettling.The dollar has not been able to resurface above JPY105 today for the first time since late July.The Fed's balance sheet jumped by nearly $54 bln last week to $7.06 trillion, its largest since the end of June.Canada reports July retail sales.

The EU and the United Kingdom are not negotiating like two independent countries. The EU seems to be putting an emphasis on their past relationship, but the United Kingdom wants to exercise its sovereign rights.The UK government seems to be preparing for no-deal situation, and if it does play out that way, the COVID-19-ravaged economy is likely to see another hit.A no-deal Brexit and default to WTO rules will likely lead to further disruptions in supply chains.

Despite increasing fears of a second wave of COVID-19 infections, consensus 2020 earnings forecasts have remained stable over the past 4 weeks.US equities have benefited from smaller downgrades and the remarkable market performance of the "digital defensive" sector.We remain neutral on the outlook for global markets in aggregate while becoming increasingly optimistic on cyclical industrial sectors which are insulated from any interruption by COVID-19 social restrictions.

The final months of the year are going to be extremely challenging for the global economy, with experts predicting another significant wave of COVID-19 which risks further restrictions around the world at the expense of businesses that are already struggling to cope.Central banks are likely to be called upon again before the end of the year, and while the ECB opted against laying the groundwork for more stimulus, others may not be so hesitant.With the Fed adopting a slightly modified framework, more easing could be coming.

The ECB now has an inflation credibility problem - with market-based EUR inflation breakevens diverging away from their equivalent in the US and UK.We think that the baseline case is for a dovish ECB tilt at the Sep meeting - with some signals that a further expansion of the PEPP programme is likely later this year.A dovish ECB tilt at the meeting is almost certainly the baseline case for markets going into the event.

For some time now I've been saying that I expect the U.S. and U.K to recover markedly faster than the eurozone.As the various economic numbers are coming out we see that this is actually so.Be underweight eurozone therefore, overweight U.K. and U.S.