Rising car prices explain why US import prices from Japan haven’t fallen despite the sharp weakening of the yen. While growth in car prices has slowed as supply shortages have unwound, this hasn’t boosted export volumes so far and we think that the weak …
10th June 2024
Another strong reading on the US labour market has reversed much of the recent drop in US interest rate expectations but we continue to think Treasury yield are headed lower later this year. Today’s US non-farm payrolls report for May came in at a …
7th June 2024
Will the US continue to dominate the global economy in the coming years? Will China or Europe ever catch up? Is the US where investors will continue to see stronger stock market returns? The question of US outperformance runs to the heart of the global …
The strong nonfarm payrolls report released earlier today broke the recent streak of downward data surprises out of the US and has renewed strength in the dollar. Even so, the greenback looks set to end the week only somewhat stronger against most …
The Bank of Canada kicked off its loosened cycle this week and the accompanying communications left the door open for another cut in July, although still-strong wage pressures are one reason why the Bank may opt to take a more gradual approach. “Let’s …
ANC’s unity government talks likely to be fraught South Africa’s post-election uncertainty continued this week, with the ANC outlining its desire for a government of national unity with a broad range of opposition parties. This looks like a non-starter, …
We don’t think that the below-potential GDP growth implied by the recent activity data is a cause for concern yet, particularly while the labour market appears healthy. That will keep the Fed squarely focused on the inflation side of its mandate at its …
In the coming years, we expect Europe to raise barriers to trade and investment with China but to do so in a targeted and gradual manner. If so, there would be big implications for some sectors, including electric vehicles and renewable technologies, but …
Mexico: Morena supermajority spooks investors Investors have reacted negatively to Mexico’s election outcome, with the peso selling off sharply after the announcement of the election results. And while the currency has pared some of its losses, it’s still …
Elections in South Africa, India, and Mexico have generated sizeable reactions in their financial markets over the past week or so, highlighting the potential for electoral surprises to generate short-term volatility. This Update takes stock of the …
CBRT reserves on the rise The rebound in Turkey’s FX reserves in the past two months, alongside the sharp reduction in the central bank’s FX swap programme, has taken the CBRT’s net FX position into positive territory for the first time in four years. …
This week both the Conservative and Labour Party have been quick to tell us about ‘financial black holes’ in their opponent’s tax and spending plans. But there are two big things neither party is telling us. First, sticking to their fiscal rules means …
Labour market conditions continue to loosen The further rise in the unemployment rate in May shows that the labour market continues to loosen, but the surprising pick-up in wage growth still provides reason to be cautious about the idea that the Bank of …
Mexico’s strong services inflation to concern hawkish Banxico Mexico’s headline inflation rate came in at a weaker-than-expected 4.7% y/y in May but the continued strength of core services inflation means that it is increasingly likely that Banxico will …
Data released this week confirmed that the euro-zone economy is out of recession, but that domestic demand is still quite weak. The second estimate of Q1 GDP showed that the economy expanded by 0.3% q/q. But the breakdown revealed that was fully explained …
The decision by OPEC+ last Sunday to increase output from October caught investors by surprise and sent oil prices sinking to below $78 per barrel early in the week. Ahead of the meeting, investors had expected that the cuts would be rolled over for the …
Payrolls outperform, but gap with household measure growing The bigger-than-expected 272,000 gain in non-farm payrolls in May will soothe recent fears that the bottom had suddenly dropped out of the economy. With average hourly earnings increasing by 0.4% …
Trade barriers doing little to slow influx of goods Trade data published today showed that Chinese exports remained on a tear in May, rising 14.5% y/y in volume terms. This will add to concerns in Western countries about the influx of Chinese goods, which …
CBR sounds hawkish, rate hike becoming more likely Russia’s central bank (CBR) left its key policy rate on hold at 16.00% but delivered a much more hawkish message at today’s meeting. Inflation concerns are likely to persist for some time and we think the …
Equities up at the end of an extraordinary week The dust is settling on an extraordinary week for domestic politics and financial markets. Equities rallied on Monday (See Chart 1) following the release of election exit polls at the weekend pointing to a …
Weak growth to prompt Thailand rate cut We expect the Bank of Thailand to start its easing cycle on Wednesday. The economy is certainly in need of support. Although GDP returned to growth in the first quarter of the year, output was still only 1.7% above …
The RBI kept the repo rate on hold at 6.50% today as expected but, notably, two of out of the six MPC members voted for a cut. With inflation likely to continue falling over the coming months, we maintain our long-held view that the easing cycle will …
Confirmation house prices are stagnant The slight decline in the Halifax house price index in May confirmed that the increase in mortgage rates since the start of the year has caused house prices to stall. Mortgage rates have continued to edge up, so …
RBI still on course for August rate cut The RBI kept the repo rate on hold at 6.50% today as expected but, notably, two of out of the six MPC members voted for a cut. With inflation likely to continue falling over the coming months, we maintain our …
Regular earnings growth hits 30-year high At first glance, the jump in regular earnings growth to a 30-year high of 2.3% in April is a clear sign that the strong pay hikes agreed in this year’s spring wage negotiations (Shunto) are filtering through. …
This page has been updated with additional analysis since first publication. Exports set to remain robust in the near-term Export values rose y/y at the fastest pace since April 2023, with export volumes also picking up. We think exports will remain …
GDP growth set to undershoot RBA’s forecasts Australia last quarter recorded the weakest annual GDP growth since the early-1990s recession, leaving aside the pandemic. If the measly 0.1% q/q rise in output last quarter was repeated this quarter, annual …
Our senior economists held this online briefing shortly after the BoE announcement on the latest policy rate decisions. During the session, the team reviewed recent growth and inflation data, talked through our forecasts for policy through this year and …
6th June 2024
While euro-zone inflation data has recently surprised to the upside, which was reflected in the hawkish tone of today’s ECB meeting , we still think the 10-year Bund yield will fall faster than the 10-year Treasury yield by end-2024. Although today’s 25bp …
Container shipping costs have rebounded in the past month amid a pick-up in demand for goods from China and a possible front-loading of festive orders due to concerns about future shipping disruptions. And shipping costs could yet rise further. Our …
Investors appear to have shifted their bets away from stocks expected to benefit from using AI and doubled down on those expected to benefit from enabling the AI revolution. But the bigger picture is that AI hype has been continuing to support the US …
The ECB began its easing cycle today, as expected, but the accompanying guidance and forecasts suggest that it will proceed cautiously. We now think the Bank will cut interest rates by only a further 50bp before the end of the year, with the next cut …
Indications that take-up stabilised across many markets in Q1 were encouraging. However, looking ahead we think the prospects for occupier demand are better in southern European markets. As we recently highlighted , there were tentative signs that Europe …
A return of La Niña could provide some respite for those commodity producers who have been hit hardest by El Niño. But it could also pose problems for others – not least in South America – and so assessing any potential impacts on commodity prices is …
Overview – Activity strengthened across Emerging Europe in Q1 and we expect this to be sustained over the coming quarters, with GDP growth in most economies exceeding consensus expectations in 2024. This is likely to be accompanied by renewed inflation …
UAE emerges as clear winner from OPEC+ decision The decision by OPEC+ to keep oil production lower this year means that GDP growth across the Gulf will be a little weaker than we had previously expected. However, the UAE came away from the meeting the …
Just as fixed mortgage rates have shielded homeowners from rising interest rates, they will prevent households’ interest costs from falling rapidly when interest rates are cut. While borrowers on tracker and two-year fixed rate deals will soon see their …
Improvement in trade balance may not point to economic strength Stronger commodity exports boosted the trade figures in April, with the goods deficit narrowing to $1.0bn, from a downwardly revised $2.0bn in March. However, weaker import volumes suggest …
ECB cuts but future easing uncertain Any celebrations about today’s 25bp rate cut by the ECB are likely to be muted at best, given that the decision was fully discounted by financial markets and the most recent inflation and wage data have dampened …
Net trade set to weigh on GDP again this quarter The April trade data suggest that net trade is on track to weigh on GDP growth again this quarter, but that is primarily due to continued strength in imports, which paints a better picture of domestic …
Aggregate EM GDP growth remained strong in Q1, though we still expect a slowdown later this year. At a regional level, Emerging Asia will lead the pack, however there are tentative signs that recoveries in parts of Central and Eastern Europe and Latin …
OPEC+’s decision to roll over its production cuts into Q3 will keep supply constrained in the near term. But the unwinding of some of these cuts from October will mean that the oil market is better supplied over 2025 and oil prices should fall. Ample gas …
This page has been updated with additional analysis since first publication. Euro-zone sales ticked down but past the worst Retail sales ticked down in April we expect them to rise gradually from here. The 0.5% m/m decline in retail sales in April was a …
Construction activity picks up in both housing and commercial sectors The headline CIPS construction PMI rose to a two-year high of 54.7 in May. Both the commercial and housing balances improved, with the latter rising above 50 for the first time since …
India’s election result isn’t, in our view, reason to turn downbeat on the country’s equity market, its wobbles earlier this week notwithstanding. But with a very positive story seemingly still priced in to India’s equities, both on the political and …
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
Although the gap between 10-year Treasur y and Canadian Government Bond (CGBs) yields has reached the highest level in at least three decades today, we think it will widen even further in the next couple of years . The 10-year CGB yield has fallen ~15bp …
5th June 2024
Activity softens slightly, but still running hot Russia’s economy appears to have had a slightly softer start to Q2, with industrial production and retail sales growth both slowing in April. Still, the latest indicators for May have remained strong and …
Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests another rate cut in July is nailed on. As Governor Tiff Macklem shrugged off any potential concerns about exchange …
