Sub-Saharan African central banks are unlikely to follow their peers in other EMs in cutting interest rates soon. With inflation falling more slowly, alongside balance of payment and public debt strains, interest rates will stay high for longer. Nigeria …
5th October 2023
The trend of rapid increases in industrial metals supply this year is likely to unwind over the next few years for copper, but we think nickel supply growth will remain robust. We think that divergence will be a key reason why the price of copper will …
While we think the risk of a material increase in euro-zone “peripheral” spreads has risen, our central forecast remains that they will end 2024 a bit below their current levels. Last week, long-dated euro-zone peripheral bond yields reached highs not …
The ‘higher for longer’ narrative on interest rates that is baked into market pricing is at odds with evidence of widespread falls in inflation. Higher oil prices mean that fuel inflation will be a bit higher than seemed likely a few months ago. But the …
A laundry list of explanations has been provided for the surge in the term premia of Treasuries since mid-year, which has accounted for more than ~100bp rise in the 10-year yield based on the ACM model estimate. (See Chart 1.) One explanation that doesn’t …
Al-Sisi confirms his running; UAE opens swap line Egypt’s incumbent President al-Sisi has confirmed he will run for re-election in December in a race that he is almost certain to win. The policy paralysis induced by this election has prompted central …
Surge in exports an upside risk to preliminary GDP estimate Exports rose by far more than imports in August, even as the latter benefited more from the fading disruption from the earlier BC port strikes. That suggests there are upside risks to the …
Q3 exports rebound, but outlook remains weak The trade deficit narrowed to a three-year low of $58.3bn in August, from $64.7bn, as exports increased by $4.1bn or (+1.6% m/m) and imports declined by $2.3bn (-0.7% m/m). The gain in exports was driven by a …
NBR holding firm in inflation fight The National Bank of Romania (NBR) kept its main policy rate unchanged at 7.00% today, and we expect policy to remain on hold into next year. The NBR will be the last in Central and Eastern Europe to start cutting …
Rising food prices have already led to upside inflation surprises in parts of Asia, and central banks in the region are likely to ease policy later than their EM peers. But inflation should eventually resume its downward path and, once it does, policy …
Equities in the Textiles, Apparel & Luxury Goods industry have fared quite poorly recently, which has weighed on the luxury-heavy French stock market. But while they might underperform a bit more in the near-term, we suspect that they will recover next …
We expect any rise in bond yields to be gradual and don’t believe it will create major economic or market dislocation. But there are risks that the Bank of Japan loses control over longer-term yields . A rapid surge in bond yields would threaten the …
The central bank (CBSL) today cut interest rates by a further 100bps. With inflation low and the economy still very depressed, further easing is likely over the coming months. Today’s 100bps cuts take the lending and deposit rates to 10% and 11% …
This page has been updated with additional analysis since first publication. Construction PMI falls below 50 as commercial balance plunges The decline in the headline CIPS construction PMI from 50.8 in August to 45.0 in September took it below the 50 …
We think the yields of 10-year government bonds in Australia, New Zealand and Canada will diverge from the yield of 10-year US Treasuries – which they have tracked very closely this year – over time, with bonds in all three countries outperforming those …
The latest activity data from Korea were downbeat. Although industrial production grew strongly, the manufacturing PMIs, along with the export figures and retail sales data, all point to continued weakness. However, with inflation rising again last month, …
Australian economy braces for weaker growth Data released today reaffirm our view that the Australian economy is on shaky ground. To start with, trade data suggest that net exports will have become a drag on GDP growth in Q3. The trade surplus widened …
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
IWG’s record revenues in the first half of this year may suggest that flexible offices are the answer for many firms as hybrid working cements itself as the ‘new normal’. However, we don’t think current flexible offices currently offer the right product …
Food price inflation is now falling back, which will help boost supermarket profits. That means the recent underperformance of the supermarket sector relative to all-retail will soon come to an end. Total returns are set to turn positive in 2023 and by …
While government bond yields have stabilised today, their sharp rises over recent weeks are increasingly concerning. We think there are four key observations to make at this point. First, long-term yields have been rising steadily since mid-July, but have …
Falls in the value of China’s recorded holdings of US Treasuries tell us little about whether China is divesting from the dollar. A broader look at the data suggests that it isn’t, despite geopolitical pressure to decouple. And while we don’t have timely …
Overview – With economic activity weakening, we expect rental growth to continue trending downwards over the next year. At the same time, valuations remain stretched despite property yields continuing to rise at a steady pace. As a result, we have …
Slowing momentum in activity, the recent decline in employment, and the sharp falls in core CPI and services inflation in August are clear signs that higher interest rates are weighing more heavily on the economy. This strengthens our view that the mild …
Surveys consistent with moderate growth The small fall in the ISM services index to 53.6 in September, from 54.5, contradicted the rebound in the ISM manufacturing index. Nevertheless, the weighted average of the two ISM surveys are still consistent with …
NBP cuts again, but rates won’t fall as far as most expect The National Bank of Poland’s (NBP’s) decision to cut interest rates again today, from 6.00% to 5.75%, suggests that the doves are ruling the roost on the MPC, but we think that interest rates …
The resilience of investment in the euro-zone to higher interest rates and slowing economic growth at the start of the year appears to have been driven in part by the gradual clearing of backlogs in various industries. This has now come to an end and we …
Saudi Arabia’s labour market has strengthened markedly in its post-pandemic recovery and the headline figures mask a dramatic shift in the size and composition of the labour force. In particular, social reforms have helped the female participation rate to …
High mortgage rates crush home purchase demand Rising mortgage rates caused mortgage applications for home purchase to slip to a fresh 28-year low in September. With mortgage rates edging above 7.5% in the last week of the month as Treasury yields surged …
This page has been updated with additional analysis since first publication. Euro-zone headed for recession The drop in retail sales in August and weakness in the final PMIs for September are consistent with our view that the euro-zone economy will fall …
While some measures of optimism have been improving, the majority of the survey evidence suggests the economy is weakening and the chances of the mild recession we have been forecasting have increased. The 0.5% m/m fall in real GDP in July and the decline …
With its assessment of the balance of risks broadly unchanged, the Reserve Bank of New Zealand left rates on hold at its meeting today. Although the Bank will likely retain its tightening bias, we continue to believe that the official cash rate is at its …
RBNZ’s next move will be down Although the RBNZ will retain its tightening bias, we believe that the official cash rate is at its cyclical peak. All 27 of the analysts polled by Reuters, including ourselves, had expected the Bank to leave the OCR …
Office-based jobs are on course to underperform total jobs this year for the first time since 2009 and there is a growing risk this could be repeated in 2024, though that is not yet our central forecast. At the metro level, we expect differentials to …
3rd October 2023
Although the job openings rate rebounded sharply in August, we suspect that was more noise than a signal that the labour market is enjoying a resurgence. The rest of the JOLTS report presented a more balanced picture, with the latest data still pointing …
This page has been updated with additional analysis since first publication . Japan’s Ministry of Finance may have intervened in support of the yen today after the USD/JPY rate rose through the symbolic 150 level in the wake of the upside surprise in US …
Brazil’s monetary easing cycle will probably lead to higher spending in interest rate sensitive areas, such as furniture and appliances, autos and construction materials. But that won’t be enough to prevent overall GDP growth from slowing sharply – and by …
We think that the yields of Australian long-term sovereign bonds will fall by a bit less than those of US Treasuries over the next couple of years, even though they’ve moved in lockstep lately. But the picture looks a bit different, to us, in other …
Talk of “dollarisation” has recently re-emerged, despite broader moves in the EM world to challenge the hegemony of the US dollar. Indeed, the fact that Argentina is considering adopting the dollar underscores that the greenback will remain the currency …
This page has been updated with additional analysis since first publication . Industry stumbled in Q3 The 0.4% m/m rise in Brazilian industrial production in August failed to fully offset the decline in July and suggests that the sector was as a drag on …
This report has been updated with additional analysis, as well as a Chart of the key data. Gulf non-oil sectors cushioning slowdown; Egypt’s economy sputtering along The September release of PMIs for the Middle East and North Africa showed that activity …
Schisms with the EU. Wavering support for Ukraine. Sky-high inflation. The stakes in Poland’s general election on Sunday 15th October couldn’t be higher. Economists from our Emerging Europe and Financial Markets teams held an online briefing about the …
Note: We discussed the key takeaways from our Q4 Global Economic and Markets Outlooks in a Drop-In on Wednesday, 11 th October. To view the recording Click here . Table of Key Forecasts Global Overview – We think that the now popular assumption that …
This publication has been updated with additional analysis. Inflation rising, but not for long The rise in Switzerland’s headline inflation rate in September was largely due to the increase in oil prices in recent months, which caused energy inflation to …
Inflation surge starting to cool, but further rate hikes in store The small (by Turkey’s recent standards) rise in inflation to 61.5% last month, from 58.9% in August, provides the first signs that the inflation spike is close to levelling off. But the …
This page has been updated with additional analysis since first publication. Indian manufacturing growth cools a touch India’s manufacturing PMI moderated in September but remained high. However, there are reasons to think a further slight cooling in …
Construction spending in Korea is falling sharply as developers respond to an oversupply of new homes by cutting back on new projects. The sector’s weakness will remain a major drag on economic growth throughout next year. Property prices in Korea dropped …
While new RBA Governor Michelle Bullock didn’t spring any surprises at her first interest rate decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in November . However, we expect the RBA to pivot towards …
RBA will deliver final rate hike next month While new RBA Governor Michelle Bullock didn’t spring any surprises at her first monetary policy decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in …
