CIO Brief

Research evidence excerpt

CIO Brief

rence in Sintra sharpened the policy divide between the ECB and Fed. We still

expect the ECB to deliver a 25bp hike in September, while softer inflation, lower oil prices, and weak PMIs could derail

further tightening. In the US, Chair Warsh’s focus on lower inflation risks and a steadier labor market supports our view that

the Fed will not hike this year. read more

Europe Equity Strategy: Constructive into Earnings, Target Up

European earnings revisions, margins, and analyst expectations have strengthened. We raise our 2026 EPS growth forecast

to 12.5% from 11.2%, lift the target NTM P/E to 16.5x from 16.0x and increase our June 2027 MSCI Europe target to 2,810,

implying 10% price upside and about 15% total return including dividends and buybacks. Our analyst previews show the

most constructive earnings setup in years, with Semis, Banks, Capital Goods, and Utilities leading expected beats ahead of

the peak reporting week commencing July 27. read more

Asia Economics: Defense Spending – Shifting into a Higher Gear

Asia’s defense spending has shifted higher since 2022, and we expect 2026 spending to rise 10% Y/Y to US$700bn, or 1.8%

of GDP. Medium-term commitments could lift spending toward US$1-1.2tn by 2030, as higher defense capex supports our

broader capex super-cycle thesis. The fiscal space looks tighter in EM Asia, while AI and defense-led innovation should

partly offset the modest productivity drag from defense spending. read more

Currency Strategy: The Plausible and Probable Path to DXY Weakness

We see a plausible 3-5% path lower for DXY, contingent on the upcoming CPI print confirming a “Fed cuts” narrative.

Inflation swaps are pricing in cuts in 2H26, while FX options price only a 20% chance of the 1-3% USD-cross decline that