The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
27th October 2023
The preliminary data for Q3 were sobering, with euro-zone prime yields moving up significantly more than expected. This confirms the 2022-23 real estate contraction as the worst on record and, with offices the key driver, it now looks like the value falls …
Argentina: it’s not the economy, stupid? Elections in Argentina rarely fail to surprise and Sunday’s vote was no exception. While it was widely expected that the election would go to a run-off between Peronist and current Economy Minister Sergio Massa …
Has the AI productivity boom already begun? New Speaker, old problems The House Republicans finally managed to elect a new Speaker this week, with the caucus eventually rallying around Mike Johnson, who up until this week could hardly have been described …
This week’s data releases provide further evidence that the euro-zone is probably in a mild recession. The euro-zone Composite PMI declined to a level consistent with GDP contracting by 0.2% q/q (see here ) and although the Ifo Business Climate Indicator …
Stronger rise in core prices likely to be a blip The stronger gains in real consumption and the core PCE price index in September are a potential concern for Fed officials, but won’t be enough to convince them to resume raising interest rates next week, …
Giving with one hand, taking with the other Earlier this week, China’s legislature increased the government’s planned annual budget deficit from 3.0% of GDP to 3.8%. This was the first mid-year revision since 2008 and only the fifth in the PRC’s history. …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
Strengthening ties with the Quad India’s government is pushing ahead with efforts to make India a key link in global manufacturing supply chains. The Cabinet this week approved a Memorandum of Cooperation with Japan on a semiconductor supply chain …
Taiwan’s growth moderated in Q3 Activity data published this week for Taiwan paint a mixed picture of the economy. Consumer demand is coming off the boil but exports have rebounded. More details will be available in the Q3 GDP figures due next week. …
CBR delivers a larger hike as fiscal risks mount Russia’s central bank (CBR) opted for a larger-than-expected 200bp interest rate hike, to 15.00%, at today’s meeting and, while policymakers seemed to signal that the tightening cycle is at an end, we think …
Global goods trade rose slightly in August and timelier data point to further gains in September. But we expect global trade to fall again in due course as economic downturns in several advanced economies weigh on their demand for traded goods. According …
Economy still growing but set to weaken GDP data for Spain in Q3 were a bit stronger than expected and showed that the economy was proving more resilient in the face of high interest rates than anticipated. But the outlook is still weak. The 0.3% q/q …
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
RBA has more work to do Most of the data published this week highlight the imperative for the RBA tighten policy. To start with, Wednesday’s CPI release showed that Australia’s inflation problem is far from over. In fact, there are two pieces of …
This page has been updated with additional analysis since first publication. Underlying inflation set to decline further While the jump in inflation in Tokyo to a seven-month high wasn’t nearly as bad as it looks, it is consistent with our view that …
26th October 2023
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
Spreads in Greece, Italy, Portugal, and Spain have diverged in unusual directions this year, and we doubt that these trends will revert any time soon. As was universally anticipated, the ECB stood pat at its meeting today: policy rates were kept unchanged …
Although US high-yield (HY) corporate bonds are more attractively valued than at any time since the Global Financial Crisis (GFC), we doubt they will outperform US equities over the next couple of years. The yield of ICE BofA’s index of US HY corporate …
We think the Chilean peso is poised for a rebound in 2024 as the headwinds from the narrowing interest rate differential and the terms of trade deterioration reverse. The Chilean peso has underperformed nearly all other major emerging market currencies …
Following today’s decision to leave interest rates on hold, the ECB’s tightening cycle appears to be over. We think that rates will stay at their current levels well into next year. The Governing Council did not discuss accelerating the pace of QT today, …
Our new higher forecasts for US Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted. While we still expect mortgage rates to decline they are unlikely to fall below 6.0% before end-2025, muting any recovery in house …
After the 336,000 jump in non-farm payrolls in September, we expect a more modest 200,000 increase in October. Moreover, despite some strength in labour demand, wage growth continues to ease. September’s unexpectedly-strong 336,000 rise in non-farm …
We think the cautious oil market reaction to the outbreak of conflict in Israel probably reflects the huge uncertainty about the eventual outcome, but also a somewhat lower “Middle East” risk premium. For context, the Brent crude oil price has risen by …
Saudi real estate market stuck in a gully The mortgage market in Saudi Arabia has struggled this year as interest rates have surged, which appears to be adding to the trend of the past few years of suppressed land and house prices. Data published over the …
ECB policy rates at a plateau Today’s decision to leave interest rates unchanged, and the tone of the press release, were as expected. There is no mention of ending PEPP reinvestments early or raising banks’ reserve requirements, but in the press …
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
US households still the world’s spenders of last resort On its own, the stunningly-strong 4.9% annualised gain in third-quarter GDP suggests that the Fed needs to do even more to slow demand, but just as notable was the slowdown in core PCE inflation to …
This page has been updated with additional analysis since first publication . Copom on course for another 50bp cut next week The Brazilian mid-month inflation figure for October, of 5.0% y/y, confirms that the recent rise in inflation has now passed its …
CBRT maintaining the fight against inflation Turkey’s central bank stuck to the course today as it delivered another 500bp interest rate hike, to 35%. A few more large hikes are likely to be delivered in the coming months too, which should help to turn …
The war between Hamas and Israel – and the potential for escalation to the wider region – has increased the uncertainty around the economic and financial market outlook, but in most scenarios is unlikely to generate a sustained hit to major asset markets. …
Higher bond yields will add to fiscal pressures in those EMs with particularly large public debt burdens and weak debt dynamics. Brazil, South Africa as well as Colombia and Mexico are the EMs from our analysis whose fiscal positions are the most …
Continued strong growth in unsecured lending is putting India’s banks at risk of rising defaults, a concern that is exacerbated by their relatively low loan loss absorption capacity. This raises the possibility of the sector entering a slow-burning crisis …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) A second consecutive hold to all-but confirm that 5.25% is the summit for interest rates Sticky core …
The central bank (BSP) in the Philippines today raised its main policy rate by 25 bps (to 6.50%) in an out-of-cycle interest rate decision. While we had expected an interest rate hike at the upcoming scheduled meeting in mid-November, today’s out of cycle …
Economic growth in Korea was stronger than expected in Q3 but we think the economy is set to weaken in the near term as support from external demand fades while tight fiscal and monetary policy continue to curtail domestic demand. According to the advance …
Strong immigration is unlikely to be enough to prevent a mild recession, with GDP contracting recently and the business surveys consistent with further declines. As house prices are falling again, household debt is elevated and high interest rates are …
25th October 2023
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
We expect the US Treasury 10-year/2-year yield spread to turn positive before long, and subsequently rise further over the next year or so. The rapid move towards “disinversion” of the US Treasury yield curve seems to have regained steam today as yields …
EU natural gas prices have risen in recent weeks highlighting that a reliance on LNG imports is not without risk. That said, prices should fall back next year as a significant amount of LNG export capacity comes online, first in the US and then in Qatar. …
Fed to hold rates at 5.25%-5.50%, and keep further tightening on the table… …but surging long-term Treasury yields reducing appetite for final hike Sharp decline in core inflation to see rates cut to 3.25%-3.50% by end-2024 We don’t expect a significant …
Bank maintains tightening bias but next move likely to be a cut Although the Bank of Canada maintained its tightening bias today, the rest of the policy statement suggests that the Bank is growing more confident that its job is done. We continue to expect …
Argentina’s oil and gas production growth has slowed sharply recently due to pipeline capacity constraints. New projects should ease these bottlenecks, and production should rise from 2024. Admittedly, the expected increases in output are not large enough …
Brazil and Mexico will outperform others in the region this year, but that’s likely to flip on its head in 2024 as they slow – and by more than most expect – while the Andean economies recover. Rapid wage growth will keep inflation above target for some …
New home sales resume upward trend Extraordinarily limited supply in the existing homes market continued to drive buyers to new homes in September. The 12.4% m/m rise in new home sales in September took them to 759,000 annualised (consensus 680,000), …
