①Goldman Sachs Raises South Korea Growth Forecast: AI Chip Boom Continues, Exports May Surpass $1 Trillion for the First Time
②Citi: Starmer’s Resignation Sparks UK Political Uncertainty, Sterling Under Short-Term Pressure
③ANZ Delays Fed Rate Cut Expectations: Earliest Action in June Next Year, Divergence on Rate Hikes Intensifies Within the Year
On this basis, even if an additional supplementary budget of a scale similar to the first emergency supplement is introduced in the second half of the year, South Korea’s consolidated fiscal deficit could decline from the budgeted 1.9% of GDP to below 0.5%. Risks are primarily concentrated in the resurgence of apartment prices in the capital area since May, while housing prices in other regions have remained broadly stable. Goldman Sachs Warns of ASEAN Food Inflation Upside: Oil, Fertilizer, and El Nino May Jointly Shock According to the latest research report from Goldman Sachs, oil price increases triggered by Middle East conflicts, higher fertilizer prices, and a potential strong El Nino event expected between late 2026 and early 2027 could jointly push up ASEAN food inflation. The firm estimates that these three shocks could, on average, add approximately 2.1 percentage points to ASEAN food inflation after 12 months, with Indonesia, the Philippines, and Thailand facing the most prominent upside risks, while the impact on Singapore and Malaysia would be relatively limited. As of the end of May, Brent crude oil and urea prices remained approximately 46% and 63% higher, respectively, than in February, despite having retreated from their April peaks. The U.S. National Oceanic and Atmospheric Administration projects that the relative Oceanic Nino Index, reflecting El Nino conditions, will rise to approximately 1.7 degrees Celsius by the end of 2026, potentially disrupting agricultural supply again as oil prices and fertilizer costs transmit through the food supply chain. Goldman Sachs estimates that a 10% increase in oil prices in local currency terms would, on average, raise ASEAN food CPI by about 0.3 percentage points after 12 months, while a 10% rise in fertilizer prices would have an impact of approximately 0.2 percentage points. Oil price transmission is prevalent across countries, whereas the effects of fertilizer and El Nino exhibit greater divergence. Combining the three shocks, ASEAN food inflation would rise by an additional approximately 1.0, 2.1, and 2.0 percentage points after 6 months, 12 months, and 18 months, respectively. In terms of peak impact on overall CPI, Indonesia could see an increase of 1.2 percentage points, the Philippines 1.1 percentage points, Thailand 0.7 percentage points, Malaysia 0.2 percentage points, and Singapore 0.1 percentage points. ASEAN food prices are highly synchronized, with regional common factors explaining approximately 70% of food inflation volatility. Meanwhile, food holds a high weight in the CPI baskets of several countries, and Singapore and the Philippines are net food importers. Malaysia and Indonesia’s food surpluses are mainly concentrated in palm oil, making them net importers once palm oil is excluded. Thailand, although a broad net food exporter within the region, relies on imports for over 90% of its fertilizer. Goldman Sachs also points out that higher oil prices have prompted Indonesia, Malaysia, and Thailand to raise biodiesel blending ratios, further diverting palm oil away from food supply.
At the policy level, measures such as releasing grain reserves, easing import restrictions, providing subsidies, and implementing price caps can cushion the impact, but they may also reduce the predictability of inflation transmission. Foreign Exchange Citi: Starmer’s Resignation Triggers UK Political Uncertainty, Sterling Under Short-Term Pressure Following the announcement of UK Prime Minister Keir Starmer’s resignation, the Labour Party will initiate a leadership election. Citi believes that the resignation news had been widely anticipated by the market, resulting in a limited initial market reaction. However, uncertainties surrounding leadership transition, fiscal policy direction, and the selection of the Chancellor of the Exchequer may still weigh on the pound and disturb the UK gilt market in the short term. According to the schedule, the nomination period for the Labour leadership will open on July 9 and close before the summer recess on July 17. The Labour Party’s National Executive Committee will further determine the formal timeline, nomination thresholds, and election rules. Citi expects the full election process to last at least six weeks, with a new leader potentially emerging before the party’s annual conference in September. Until then, Starmer will remain in office and attend the NATO summit on July 7 and the UK-EU summit on July 22. Candidates must secure the support of at least 20% of Labour MPs, equivalent to 81 members, and the number of candidates expected to reach the final ballot is limited. Citi believes the contest will likely be primarily between Andy Burnham, who recently won a by-election and returned to Parliament the same day, and Health Secretary Wes Streeting, with Burnham holding a relatively higher chance of victory. If Streeting does not stand or fails to secure sufficient nominations, Burnham could be elected directly. Citi notes that Streeting is perceived by the market as a candidate offering greater policy continuity, whereas a Burnham government would entail greater policy uncertainty. Should Burnham prevail, the market’s most notable area of focus may be a shift in fiscal rules toward an “investment fiscal rule,” which could expand borrowing capacity within the Office for Budget Responsibility’s forecasting framework. Meanwhile, whether current Chancellor Rachel Reeves remains in her position will also be a key variable for the gilt market. Citi expects the pound to face continued downward pressure in the short term as the leadership contest compels candidates to articulate their fiscal and economic policies more clearly. Global Central Banks ANZ Delays Fed Rate Cut Expectations: Earliest Action in June Next Year, Divergence on Intra-Year Cuts Intensifies ANZ believes that Warsh’s first chairing of the Federal Reserve’s policy meeting signaled a stronger anti-inflation stance, with the Fed prioritizing the return of inflation to target within its dual mandate, thereby significantly raising the bar for rate cuts. The bank has consequently delayed its first rate cut expectation to the second quarter of 2027, anticipating an initial cut of 25 basis points as early as June, followed by another 25 basis points in the third quarter, which would bring the federal funds rate target range down to 3.
0% to 3.25%, 50 basis points lower than the current level. The Federal Reserve has significantly raised its inflation forecasts for end-2026, now projecting headline PCE and core PCE at 3.6% and 3.3% year-over-year, respectively, both notably higher than the 2.7% forecast in March. ANZ notes that the forecasts mainly reflect higher energy prices at the time; if the U.S.-Iran agreement drives sustained declines in oil prices, there is downside risk to the headline PCE forecast. However, Warsh emphasized that monetary policy cannot eliminate exogenous energy shocks, with the key focus being to prevent them from evolving into second- and third-round inflation effects. ANZ states that inflation has not yet spread significantly beyond energy-sensitive sectors: supercore PCE month-over-month has declined from 0.47% in January to 0.18% in April, and supercore CPI has fallen from 0.59% in January to 0.27% in May. Inflation expectations remain relatively stable, and wage growth is moderating. There is clear divergence within the FOMC regarding whether rate hikes are needed this year. Among the 18 members, 9 expect rates to rise by year-end, while the other 9 do not see a need for hikes. ANZ believes that Board members and New York Fed President Williams may constitute the faction opposing rate hikes this year, but several members are open to further hikes, implying that rate cuts would require more substantial evidence. ANZ also points out that the Fed has ended forward guidance, and Warsh has established five working groups covering communications, balance sheet, inflation framework, data, and productivity and employment, with assessments expected to be completed by year-end. This week, markets will focus on the May PCE data; if core PCE rises 0.3% month-over-month, the year-over-year rate could increase from 3.3% to 3.4%, further reinforcing the Fed’s inflation concerns. Commodities Goldman Sachs: Accelerated EV Sales Could Reduce Global Oil Demand by 320,000 Barrels Per Day by End-2027 Due to supply disruptions in the Strait of Hormuz and higher fuel prices, global passenger EV sales have accelerated notably. The latest Goldman Sachs research report indicates that if this trend continues, global oil demand could be reduced by 130,000 to 320,000 barrels per day by December 2027 compared to the baseline scenario, equivalent to 0.1% to 0.3% of global demand, presenting new downside risks to medium- and long-term oil prices. Goldman Sachs’ real-time estimates show that since February this year, the global EV penetration rate in passenger vehicle sales has increased by 3.4 percentage points, reaching a historic high of 26.1% in May, excluding the anomalous fluctuation in September 2025 before the expiration of U.S. tax credits. Among the 15 largest EV markets, 12 have seen rising penetration rates, indicating the broad-based nature of this growth.
China is the primary driving force. Since February, China’s EV penetration rate has risen by 11.4 percentage points, contributing 61% to the global penetration increase. OECD markets excluding the U.S. contributed 21%, while non-OECD markets excluding China contributed 19%. The U.S. penetration rate only rose by 0.1 percentage point, mainly due to the earlier expiration of the federal EV tax credit.
Goldman Sachs estimates based on the rule of thumb that “for every 1 million fuel vehicle sales shifted to EVs, U.S. road oil demand decreases by 30,000 barrels per day, and other regions by 20,000 barrels per day”: If regional EV penetration rates remain at May levels, global oil demand will decrease by 130,000 barrels per day by the end of 2027. If penetration continues to grow at the trend from February to May, with China’s growth gradually slowing after August this year and other regions continuing until the end of 2027, the demand reduction could expand to 320,000 barrels per day. Goldman Sachs emphasizes that the above estimates only cover new passenger car sales, not accounting for the substitution effect of increased EV usage due to high oil prices among existing vehicles or plug-in hybrids switching to charging, nor do they cover two-wheeled or three-wheeled EVs and non-road fuel demand. The bank believes that if Hormuz-related supply losses reach 1.5 million barrels per day long-term, higher than the 500,000 barrels per day in the baseline scenario, coupled with larger-than-expected supply, Brent oil prices could fall to the mid-$50s per barrel by the end of 2027. Companies Oppenheimer Raises SpaceX Target Price to $250: Cursor Acquisition Boosts AI Revenue Expectations Oppenheimer’s latest research report raises SpaceX’s target price from $190 to $250, maintaining an “Outperform” rating. The bank believes that with improved revenue visibility from the Cursor acquisition, SpaceX’s AI business growth prospects have significantly improved. The company may continue to acquire key capabilities such as large models, data centers, power, and spectrum through further acquisitions. Oppenheimer estimates that Cursor’s current annualized revenue run rate is approximately $4 billion, up from $1 billion at the end of 2025, and could rise to $6 billion by the end of 2026. Driven by this, the bank raises its Q4 2026 AI revenue forecast for SpaceX from $4.75 billion to $8.75 billion, and increases its total revenue forecasts for 2026 and 2027 to $33.3 billion and $64.2 billion respectively, up from previous estimates of $31.3 billion and $58.8 billion. The bank believes that SpaceX possesses assets across rocket launch, satellite manufacturing, Starlink communication networks, ground and potential space data centers, chips, models, and application layers. Vertical integration is expected to bring cost and capability advantages.Cursor is viewed as a key application gateway, with over 1 million daily active users and coverage of roughly two-thirds of the Fortune 500, providing developer behavioral data for model training.
In communications, Oppenheimer expects Starlink broadband capacity to increase approximately tenfold over the next decade, supporting about 200 million fixed broadband users by 2035; the mobile user base is expected to significantly surpass fixed users in the long term. The firm anticipates that SpaceX may enter the mobile communications market through MVNO partnerships, spectrum acquisitions, and satellite backhaul, with T-Mobile viewed as a potential partner. Over the long term, Oppenheimer projects that SpaceX will achieve reliable reuse and commercial operation of Starship between 2027 and 2028, driving V3 satellite deployment and early space-based computing pilots. In its base-case scenario, the company expects revenue to exceed $250 billion by 2030, with an EBITDA margin of approximately 60%. However, Starship commercialization, ground-based power availability, space data center cooling, chip production capacity, and TeraFab construction remain key execution risks. Goldman Sachs: Strong AI data center demand, Murata Manufacturing MLCC cycle still in early stages Following a conference call with Murata Manufacturing management, Goldman Sachs noted that driven by strong AI and data center demand, the company’s multilayer ceramic capacitor (MLCC) orders remain at elevated levels, with book-to-bill ratios still high and capacity utilization maintained at 90% to 95%. Beyond AI and data centers, automotive application demand is also beginning to show signs of recovery. Goldman Sachs believes that, combined with a weaker yen relative to company guidance, improved product mix, and manageable cost pressures, Murata has room for accelerated earnings upside in the second half, maintaining a Buy rating and a target price of 12,600 yen. The company stated that technological upgrades in AI and data center applications will drive improvements in MLCC average selling prices, but it is currently not considering direct price increases for comparable products. In the future, if competitors face capacity constraints, or if other manufacturers raise prices first leading to order concentration toward Murata, or if rising raw material costs need to be passed through, the company may consider raising prices for comparable products. Goldman Sachs expects that progress on price adjustments in the automotive sector and whether the company studies price increases from late 2026 to early 2027 will be key points to monitor. Murata expects AI and data center-related sales to grow 85% to 90% for the fiscal year ending March 2027, with volume growth contributing 30% to 40% and product mix upgrades contributing 50% to 60%.The company maintains its MLCC capacity expansion plan: an increase of approximately 10% in the fiscal year ending March 2027, and a 20% to 25% increase in the fiscal year ending March 2028, with additional capacity contributing 10% to 15%. Management stated that they will advance capacity expansion as early as possible, and some new capacity may commence production by the end of the fiscal year ending March 2027. If demand from AI, data centers, and other applications strengthens further, a new round of capacity expansion could be considered around the end of 2027. To meet AI and data center demand, Murata is optimizing its allocation by increasing front-end processes in Japan and transferring part of consumer electronics and automotive production capacity overseas. Consumer electronics production lines are being converted, while automotive production lines have not yet been converted. Goldman Sachs expects that further improvement in selling prices and product mix for AI applications, controlled raw material cost risks, and inventory build-up from capacity expansion may drive earnings acceleration toward the second half of the fiscal year.
