This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks continue to ease, fiscal risks remain moderate Financial vulnerabilities have continued to ease across …
1st August 2024
How has the level of financial risk evolved among emerging markets over the past three months? Where have improvements been most notable across sovereign, banking and FX risk? Among more than 30 of the biggest EMs, where do vulnerabilities appear most …
Manufacturing struggling for momentum The further decline in the ISM manufacturing index in July raises the risk that GDP growth will lose momentum in the third quarter, and the plunge in the employment index will add to concerns that the Fed has left it …
The Bank of England kick-started a loosening cycle today by cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we suspect the Bank will keep rates on hold in September …
CNB slows easing cycle, but rates will still fall further than many expect Czech National Bank (CNB) Governor Michl sounded fairly cautious in his guidance about the future course of the easing cycle in the post-meeting press conference. But the …
Rates cut to 5.00%, but BoE in no rush to cut again The Bank of England kick-started a loosening cycle today, cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we now …
We have been sceptical of the viability of conversion of excess office space into residential units. But the latest figures indicate that, despite marginal financials, there may have been more activity than expected since the pandemic. And with office …
Strong PMI suggests economy is finally picking up South Africa’s manufacturing PMI jumped in July, suggesting that improving electricity supply conditions and reduced political uncertainty are starting to support activity. While the economy may finally be …
Upside inflation surprise in June has dashed hopes of rate cut next week But space for December rate cut will open as inflation heads back down to 4% We think upcoming loosening cycle will be more aggressive than consensus expects The upside inflation …
PMIs point to softer demand in Russia and Turkey The manufacturing PMIs for July suggest that industrial sectors lost a bit of momentum in Turkey and Russia at the start of Q3, although demand conditions still appear very strong in Russia. In both …
Mortgage rate reductions could help prices gain more momentum The third consecutive small monthly rise in house prices in July was a bit stronger than we had anticipated and suggests house prices are shrugging off the slight rise in mortgage rates in the …
Housing rally will do little to support activity Australian house prices gained a bit of momentum in July. However, leading indicators continue to suggest that the housing market will cool markedly in the months ahead. Even if house price growth proves …
The July PMIs from Emerging Asia nudged down slightly from the previous month but remained close to their two-year highs. However, the PMI data have been a poor guide to the hard activity data over the past year and we continue to expect manufacturing …
Copom on hold, rate cuts off the cards for the rest of 2024 Rising inflation, a worsening fiscal position and a slump in the real prompted Brazil’s central bank to leave the Selic rate at 10.50% today and strike a more hawkish tone in the accompanying …
31st July 2024
Fed lays the groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
Fed lays groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
Africa Chart Pack (Jul. 2024) …
We don’t think the recent rotation in US equities sets the stage for something much bigger. We expect the “big-tech” sectors to lead the charge again before long, helping equities in the US outperform those in most other economies. And we expect equities …
Activity softens a touch at the end of Q2 Russia’s economy lost a bit of steam in June, but it still looks like GDP growth over Q2 as a whole was very strong, with growth tracking at 4.5-5.0% y/y. Industrial production growth slowed from 5.3% y/y in May …
Labour puts wind in the sails of renewable rollout The new UK Labour government took swift action on climate policy this month on two fronts . First, the additional planning restrictions that applied to onshore wind projects in England have now been …
If implemented in full on day one, Donald Trump’s trade, immigration and fiscal policies would together be stagflationary. We suspect that he will be forced to water down his plans, however, and it could take some time to implement them. The upshot is …
Business bankruptcies rose further in the first half of 2024, mainly due to higher Chapter 11 filings as firms were forced to restructure their debts. It is typically the change in borrowing costs that matters most for Chapter 11 bankruptcies, however, …
The rise in severe weather events over the last five years has left property insurers scrambling to price-in physical risks, causing premium growth to reach a 20-year high. While we think the worst is over, growth will likely remain above the historic …
Emerging Asia Chart Pack (July 2024) …
Second-quarter growth looks a bit better than expected The larger-than-expected rise in GDP in May suggests that the economy performed a little better than we anticipated last quarter, although the preliminary estimate of only a small rise in June is …
We have revised down our forecasts for government bond spreads in Spain and Portugal, but we continue to think that those in France, as well as in Italy and Belgium, are more likely to rise than fall. The dust has now settled in bond markets after the …
Slowdown in wage growth another reason for Fed to cut rates The further slowdown in wage growth evident in the second-quarter employment cost index data won’t be enough to prompt a surprise rate cut from the Fed later today, but it does strengthen the …
The Argentine peso’s overvaluation is becoming an increasing point of concern and attention has shifted to whether the Milei administration will lift capital controls. We think that some form of easing of restrictions, such as the scrapping of taxes on FX …
At the end of the pandemic, there was a view that remote working would drive a wedge between CBD and other submarket rents. The evidence of this remains uneven. But in some cities, notably Paris and London, a shift to central locations may have helped …
Our view on emerging market local-currency government bonds is broadly upbeat for the next year or so. We think returns will be largest, in common-currency terms, in Emerging Asia. It’s been a mixed year so far for local-currency sovereign bonds in …
The latest rate hike by the Bank of Japan (BoJ) has implications for domestic and global markets – we think there are several points to note. Today’s decision by the BoJ to tighten policy by more than discounted in the markets was accompanied by a …
This page has been updated with additional analysis since first publication. Services inflation easing, but still too high for comfort The small fall in services inflation in July is probably just enough for a September rate cut to remain the base case. …
External demand no longer driving growth Hong Kong’s GDP growth slowed significantly in Q2, with activity expanding by just 0.4% q/q, down from a strong 2.3% q/q expansion in Q1, although this was slightly stronger than both we and the consensus expected …
Economy stalls, but growth to accelerate in H2 Taiwan’s economy almost stalled in the second quarter, with growth coming in well below our expectations. While we think GDP growth will pick up in the second half of the year, we are cutting our full-year …
The fading drag from load-shedding was widely expected to allow a recovery in South Africa’s economy this year, but this hasn’t materialised. We think that weak demand is to blame, itself a symptom of tight fiscal and monetary policy and a challenging …
Strong non-oil growth underpins solid Q2 Saudi Arabia’s flash estimate of GDP showed that that the economy grew by a solid 1.4% q/q in Q2 and, while non-oil activity is likely to slow over the second half of this year, it will be more than offset by …
We still think that a fading in services inflation and below-target CPI inflation will prompt the Bank of England to cut interest rates from 5.25% now to 3.00% by the end of 2025, rather than to 4.00% as investors anticipate. That explains why we think …
The Bank of Japan outlined a plan for reducing its bond purchases and hiked its policy rate by 20bp today. We think it will follow up with another 20bp hike at its October meeting . Only one-third of analysts polled by Reuters, ourselves included, had …
We think the yen’s rally will continue, but suspect that won’t stop the Australian and New Zealand dollars – alleged victims of the carry trade’s unwind – from making some ground over the next year or two. Australia’s Q2 inflation data took a bit of a …
The Reserve Bank of Australia is likely to leave policy settings unchanged when it meets next week. Although there has been little progress on disinflation in recent months, the Board is likely to pin that on the long and variable lags of monetary policy. …
Bank will hike rates once more in October The Bank of Japan hiked its policy rate by 20bp today and we think it will follow up with another 20bp hike at its October meeting. Only one-third of analysts polled by Reuters, ourselves included, had expected …
With underlying inflation edging lower, RBA will refrain from tightening Although underlying inflation is running too high for the RBA’s liking, it is at least heading in the right direction. Therefore, although the Board will probably reiterate the need …
This report was first published on 31 st July covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st August and the Caixin services and composite PMIs on 5 th August. A poor start to Q3, but more policy support on its way …
Growth should hold up in Q3 June’s strong activity data suggest that GDP may have rebounded even more strongly last quarter than we’re anticipating. The 3.6% m/m fall in industrial production merely reversed a similar-sized gain in May and wasn’t as …
Today’s release of inflation and activity data for the euro-zone has in our view slightly reduced the chances of a cut from the ECB at its next meeting. However, the bigger picture is that the data released over the past month still suggest to us that a …
30th July 2024
The JOLTS labour market data for June will do little to change the Fed’s assessment of labour market conditions ahead of its policy announcement tomorrow, with slack continuing to grow gradually and clearer signs of an easing in wage pressures. With JOLTS …
Significant homebuilding in the Sun Belt region over the past three years has restored housing inventory to pre-pandemic levels, which is why house prices there have stalled. In contrast, markets in the Northeast and California, which haven’t seen the …
