Although the US stock market has started to come under pressure from rising Treasury yields, the valuation of equities relative to government bonds is still a long way from being as stretched as it was before the dot com bubble burst and on the eve of the …
18th August 2023
Argentina: PASO vote triggers more chaos Last Sunday’s presidential primary election in Argentina (known as the PASO) sent the economy deeper into crisis. Although the results probably portend a shift to the right (and more investor-friendly …
We continue to expect historic highs for apartment completions in 2023-24 even though there are signs some will be deferred. This also means that, although new permits have dropped back amid softer market conditions and a tougher outlook for investors, we …
The Bank of England has more work to do The Fed’s work may be done, but as this week’s UK inflation and labour market releases made clear, this doesn’t mean the Bank of England can relax. First came figures released on Tuesday showing that the 3myy rate …
The continued surge in long-term Treasury yields to their highest level since before the financial crisis, as expectations of an economic re-acceleration have mounted, sets a fraught backdrop ahead of Fed Chair Jerome Powell’s speech at Jackson Hole next …
Long road ahead for Spanish politics Yesterday’s election of the Socialist (PSOE) candidate as President of the Congress of Deputies suggests that the PSOE has the momentum as Spain’s politicians try to form a new government. But it remains unclear …
This page has been updated with additional analysis since first publication . Fall in GDP will sustain central bank’s dovish turn Chile’s GDP contracted by a shallower-than-expected 0.3% q/q in Q2, but the fall in output alongside downwards revisions to …
Russia’s macro foundations now being shaken Macroeconomic stability risks started to crystallise in Russia this week. The ruble slumped and the central bank intervened with an emergency interest rate hike. Policymakers are clearly considering further …
The slowdown in rent growth in the first half of this year is likely to persist given the weak economic backdrop. Although the property price correction has slowed, we think stretched valuations will push yields higher and drive further capital value …
EM GDP growth will be weaker than most expect over the coming quarters. And with inflation falling back at the same time, the nascent EM monetary easing cycle will broaden out. Strong wage pressures in Latin America and Emerging Europe will limit how far …
RBI has ample FX reserves in its locker The rupee has this week continued to slide against the US dollar amid broad strength in the greenback, dropping to a record low of 83.1/$ on Thursday. The rupee’s depreciation may have been larger had the RBI not …
But they aren’t as big a systemic threat as some fear In addition to troubles at Country Garden , the big story in China’s credit markets this week was the turmoil at Zhongzhi. Yesterday, the asset manager cum shadow bank acknowledged that it was in a …
Property yields have risen less sharply this year, but there remains considerable uncertainty about where they will peak. We returned to our yield model for guidance and, while a re-specified equation supports our view that office yields will top out at …
This page has been updated with additional analysis since first publication. Under the weather The 1.2% m/m fall in retail sales volumes in July probably had more to do with the unusually wet weather than the impact of higher interest rates on consumer …
Weak growth and falling inflation The Bank of Korea (BoK) has left interest rates on hold since January and looks almost certain to leave monetary policy settings unchanged at its meeting on Thursday. But with inflation falling back sharply and the …
This page has been updated with additional analysis since first publication. Economic growth accelerated in Q2 but we expect a slowdown in the second half of the year as external demand weakens and elevated interest rates curtail domestic demand. …
Economy starting to run hot Given that our GDP tracker pointed to a much smaller rise, it’s possible that the blistering 1.5% q/q rise in Q2 GDP will be revised down. But that strength is consistent with the composite PMI, which hit a decade-high in May. …
New Zealand’s recession to deepen On Wednesday, the RBNZ left its official cash rate unchanged at 5.50%. Surprisingly, however, the Bank lifted its OCR track higher amid concerns about upside risks to the inflation outlook. In fact, the Bank predicts it …
This page has been updated with additional analysis since first publication. Underlying inflation will peak soon Headline inflation was unchanged in July as falling energy prices offset a further pick-up in underlying inflation. While we expect goods …
The continued rise in Treasury yields, following what may well have been the Fed’s final interest rate hike last month, contrasts with the experience of recent tightening cycles. But we still expect falling inflation between now and the end of the year to …
17th August 2023
The S&P 500 IT sector has struggled this month amid rising bond yields and waning enthusiasm for AI. While we think the sector may fall further this year in absolute terms, we still project it to outperform in this period. What’s more, we expect the …
Housing market coming back into balance The decline in the home sales-to-new listing ratio in July supports our forecast that house price growth will slow over the rest of the year. While housing starts remained high in July, they still look likely to …
Government bond yields have been hitting multi-year highs even though data show inflation in retreat and central bankers are preparing to down tools – if they haven’t already. Why the disconnect? Group Chief Economist Neil Shearing talks to David Wilder …
Egypt: debt jumps, but primary surplus widens Data released this week showed that Egypt’s public debt ratio jumped in the last fiscal year, but a further improvement in the primary budget position reinforces our view that the government will be able to …
With the headwinds growing for China’s economy, we think its equity markets will struggle, its 10-year yield will continue to fall and its currency won’t rebound as quickly as we’d thought. At the start of the year China’s economy was powering ahead. But …
China’s economy has stalled recently and headwinds are still intensifying on multiple fronts. The lack of a stronger stimulus response partly reflects a greater tolerance for economic weakness. But it also points to a worrying degree of policy paralysis, …
China’s prominence as a creditor to African economies goes a long way to explaining the slower speed of debt restructuring negotiations in Zambia, in contrast to Ghana, following their respective defaults. Mozambique and Kenya are two other countries …
Mortgage arrears were still low in Q2, but the number of Buy-to-Let (BTL) mortgages in early arrears increased at an alarming pace. We suspect that will continue in Q3. A growing number of landlords inability to meet their mortgage costs is likely to lead …
The central bank (BSP) in the Philippines today left interest rates unchanged for a third consecutive meeting and, although the economy weakened markedly in Q2 and inflation is nearly back to target, rate cuts are off the table in the near-term due to …
India’s economy is showing signs of coming off the boil, and core inflation is moderating. However, the surge in food prices has pushed headline CPI inflation well beyond the upper limit of the RBI’s 2-6% tolerance range. The onset of a severe El Niño and …
Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate cuts next year than policymakers …
Only one more Norges Bank hike to come Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate …
Rate cuts unlikely before 2024 The central bank (BSP) in the Philippines today left interest rates unchanged (6.25%) for a third consecutive meeting and, although the economy weakened markedly in Q2, elevated core inflation and upside inflationary risks …
This page has been updated with additional analysis since first publication. Unemployment rate ticks higher A boost to the labour supply is helping to take the heat out of Australia’s tight labour market. Accordingly, we’re sticking with our view that the …
This page has been updated with additional analysis since first publication . Net trade boost reversing in Q3 The July trade data suggest that the huge boost from net exports in Q2 will unwind this quarter, which will result in a sharp slowdown in GDP …
Fed officials in wait-and-see mode The minute of the Fed’s late July meeting suggest that, amid “tentative signs that inflation pressures could be abating”, officials were in no rush to follow up the 25bp rate hike at that meeting with another in …
16th August 2023
Although disinflation in the UK is lagging that in the US, we expect yields in both places to fall this year. And we think that Gilt yields are set to fall by a bit more than Treasury yields through 2024 and 2025. UK CPI data for July, released this …
Growth in the real economy appears to be gathering momentum, but with survey-based indicators still weak and credit conditions continuing to tighten, we expect that rebound to be short-lived. In contrast, labour market conditions continue to ease. Nominal …
Manufacturing boosted by seasonal adjustment problems The 1.0% m/m surge in industrial production in July was partly due to a weather-related jump in utilities output and, although manufacturing output also rebounded by a solid 0.5%, the surveys suggest a …
Exceptionally high inflation in the major economies of Central and Eastern Europe (CEE) relative to elsewhere has left their currencies overvalued against the US dollar and on a trade-weighted basis in our view. We think there is scope for these …
Single-family starts rebound, but confidence slips Single-family starts rose again in July, in line with a 13-month high in homebuilder confidence in the month. However, confidence slipped again in August. Furthermore, with the Fed unlikely to start …
The outlook for industrial metals demand has deteriorated alongside the weakening of China’s economy this year, particularly in the property sector. Monetary and fiscal stimulus might paper over the cracks, but we doubt it will be enough to do much more …
Q2 expansion, retail a weak spot South Africa’s activity data for June suggest that the economy managed to eke out positive growth in Q2, but more timely indicators suggest that activity struggled to sustain this momentum at the start of Q3. We expect …
Israel's economy maintains a steady pace of growth The small pick-up in Israeli GDP growth to 3.0% q/q annualised in Q2 shows that the economy is holding up better than we and most other had thought this year. And we think that growth will remain solid …
The support to industrial production from the end of major supply chain disruption has run its course. And while the drop in gas prices over the past year could give a boost to some firms, output expectations in the most energy-intensive sectors are …
This page has been updated with additional analysis since it was first published. Weak manufacturing to continue to weigh on economic growth Despite euro-zone industrial production having increased in June on a monthly basis, it remained well below its Q1 …
Clouds lifting over CEE, but only slowly Q2 GDP figures for Central and Eastern Europe (CEE) generally came in below expectations and suggest that the region continued to suffer the ill-effects from high inflation and interest rates last quarter. While …
Note: We’ll be discussing the economic and financial risks facing China’s economy, and their implications for global markets, in an online briefing on Thursday, 17th August. Register here to join. Financial problems at Country Garden, once considered …
