Europe

China’s re-opening – powered by the fiscal and monetary stimulus required to achieve at least 5% real GDP growth after flattish 2022 growth – and a weaker USD will catalyze demand growth this year and next, lifting global oil consumption by close to 2mm and 1.7mm b/d in 2023 and 2024. We lowered our Brent forecast slightly for this year to $110/bbl, and expect 2024 prices to average $115/bbl. WTI will trade $4-$6/bbl lower.

In response to lower energy prices and China’s reopening, European assets prices are outperforming. Will the ECB spoil the party?

While the housing downturn will be fairly mild in the US, it will be more severe abroad. Continue to favor bonds of countries whose housing fundamentals will limit rate hikes.

The crucial question for 2023 is: will the US and UK Beveridge Curves shift back inwards to their pre-pandemic versions, ushering in a soft landing? Or, will we slide down the new post-pandemic Beveridge Curves into recession? Plus: we reveal the most important chart for Europe and the most important chart for China in early 2023.