The rise in Brazilian local currency government bond yields this year is now on a scale similar to that seen during its fiscal crisis in 2015. Back then, bond yields only started to fall back when wholesale political change was on the horizon. That’s not …
4th November 2024
Despite the tick-up in the EM manufacturing PMI in October, manufacturing activity appears to have remained soft and we think this will be the case over the rest of the year. The surveys suggest that goods price pressures were contained last month, but …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
Dovish central bank hints at further rate cuts The State Bank of Pakistan (SBP) lowered its policy rate today by a further 250bps (to 15.0%) and sounded more dovish than it has done in previous meetings. Today’s cut marks the fourth consecutive meeting …
In a week in which the Federal Reserve and the Bank of England are expected to deliver further rate cuts, and there’s anticipation that the Standing Committee of China’s National People’s Congress will flesh out the details of much-anticipated fiscal …
Another upside surprise likely to reenforce CBRT’s hawkish stance The smaller-than-expected fall in Turkish inflation in October, to 48.6% y/y, is likely to dash any remaining hopes that a monetary easing cycle will start this year. The risks now seem …
Ahead of the year’s big political event, The Weekly Briefing from Capital Economics includes an exclusive clip from our client briefing all about what to expect from the US election. Chief Asia Economist Mark Williams and the team tackle everything from …
1st November 2024
Currency markets are ending the week broadly unchanged, on net, leaving the US dollar near a three-month high ahead of next week’s pivotal election. With polls continuing to point to a very tight race in the swing states and betting markets shifting back …
October’s distorted payrolls probably won’t change the outlook for the Fed, which we expect to cut by 25bp next week. Instead, earnings season and the looming US election continue to dominate markets. Treasury yields initially plunged in response to the …
Race going down to the wire Although the betting markets are still convinced that Donald Trump will win next week’s presidential election, the polls remain much closer – and within the margin of error. Many of those polls have tweaked their methodologies …
While there were some positives to take from this week’s GDP data release, it still points to an economy stuck in a period of below potential growth. This reinforces our view that the Bank of Canada will cut by 50bp again in December. Third-quarter GDP …
Mexico in the firing line The US election race is heading into the final stretch. All our analysis on what it means for EMs can be found on our dedicated webpage here . For Latin America, the implications for Mexico are largest. Both Harris and Trump …
CEE struggling, Hungary in a league of its own The Q3 GDP data out of Central Europe this week continued a bleak run of activity data for the region. The Czech economy grew by just 0.3% q/q – in line with our forecast, but some way below the central …
South Africa reembraces fiscal discipline The biggest event this week was South Africa’s Medium-Term Budget Policy Statement (MTBPS) on Wednesday, which was pitched as pro-growth, but the numbers underline that the Treasury sees little room to loosen the …
Manufacturing hampered by temporary disruptions The decline in the ISM manufacturing index to a 15-month low in October suggests that the sector continued to struggle as hurricanes and the ongoing strike at Boeing disrupted manufacturing activity further …
Risks from North Korea on the rise North Korea’s relations with South Korea and its allies have taken a marked turn for the worse over the past month. This week’s test of an intercontinental ballistic missile has prompted South Korea and the US to conduct …
The next few weeks promise to be eventful ones for commodity markets. Not only will the US president-elect be confirmed, but we may finally get details on the size of China’s fiscal stimulus as well as confirmation of OPEC+ production policy in 2025. The …
It’s still unclear if consumption will be prioritised Over the weekend, the Vice Finance Minister confirmed that the NPC Standing Committee is set to approve a fiscal package at its upcoming meeting , set to last from Monday to Friday of next week. At a …
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
This page has been updated with additional analysis since first publication. Temporary disruptions can’t explain all the labour market weakness The near-complete flatline in payrolls in October was only partly due to disruptions caused by hurricanes and …
We think that if Vice President Harris wins the US presidential election next week, she would be more likely to stick to policy continuity, and EM risk premia would remain low. If former president Trump is elected, we would expect an initial adverse …
The main economic news in the euro-zone this week were the stronger-than-expected GDP figures for Q3 and inflation figures for October, as well as a concerted effort by ECB policymakers to play down the need to accelerate the pace of rate cuts. So it is …
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
The economy has already regained some momentum on the back of increased policy support. But the extent of the recovery hinges on the scale of fiscal stimulus, which remains uncertain. Our base case is for growth to pick up over the coming quarters before …
Inflation to drop sharply next year Another larger-than-expected fall in both headline and core inflation in Switzerland will increase concerns that the country could temporarily enter deflation next year. This will pile on pressure on the SNB to act …
Elevated services inflation not a deal breaker Markets have continued to dial back expectations for policy loosening by the RBA following the release of Q3 CPI data this Wednesday. They are now fully pricing in a rate cut only by May, whereas they were …
This page has been updated with additional analysis since first publication. Mortgage rates will still fall next year and support house prices October’s 0.1% m/m rise in Nationwide house prices was a bit weaker than expected (consensus forecast +0.3% m/m, …
The October PMIs from Asia remained weak and while the PMI surveys aren’t always a good guide to the hard activity data, their recent signals are consistent with our expectation for manufacturing activity in Asia to struggle in the near term, price …
LDP loses majority for first time since 2009 We already indicated last week that the LDP might lose its majority in last Sunday’s House of Representatives election, but the fact that it failed to achieve a majority even once we include the seats of …
Rate cuts likely to cushion house price slowdown Australia’s housing rally continued to lose steam in October. However, with the RBA set to cut interest rates from early-2025, there are good reasons not to be too bearish on the outlook for house price …
31st October 2024
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
While inflation in the US and elsewhere has generally converged towards target this year, it might continue to haunt central bankers for a while yet, and in turn keep investors on their toes. There was nothing too scary in the inflation data released …
Stronger data point to a more gradual pace of loosening Fed will not surprise financial markets amid election uncertainty We see the terminal rate higher under Trump than Harris With the economy on strong ground, we expect the Fed to shift to a more …
Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
An interest rate cut from 5.00% to 4.75% seems nailed on for November It’s less clear whether BoE will quicken the pace and cut rates in December too We think cuts will remain gradual until mid-2025, with rates eventually falling to 3.00% The Bank of …
We doubt the sell-off in gilts following the Budget will gather momentum and cause another step down in commercial property values. However, given the current narrow spread between risk-free interest rates and property yields, the latter are likely to …
The US election next week is likely to have major ramifications for geopolitical ties, trade, and financial markets in the MENA region. (All our analysis on the impact of the US election on EMs can be found on our dedicated webpage here .) Attention in …
The government’s plan to trim the population will hit potential GDP growth and, given the headwinds for residential investment, reduce the chance of GDP reaching that lower potential level. Rents on new leases are set to fall, which presents downside …
Heading for a weak third-quarter The unchanged level of GDP in August and downgrade to July puts third-quarter growth on track to sharply undershoot the Bank of Canada’s estimate of 1.5%. That provides some support to our view that the Bank will cut …
Norway’s economy is struggling and inflation keeps falling faster than Norges Bank expects, yet the Bank has not started loosening policy. Next week we think it will open the door to a December rate cut. At its last meeting in September, Norges Bank said …
The latest activity data out of Emerging Europe have been surprisingly weak, and GDP growth in many parts of the region looks as though it will come in below our previous expectations this year. That said, above-target inflation remains a concern, and we …
Our UK team held an online briefing shortly after the Bank’s November meeting all about the macro and policy outlook. During this 20-minute session, the team unpacked the latest Bank decision and communications, answered client questions and addressed key …
Inflation news mixed; real economy still looks good for Q4 The news on prices was mixed, with the September data showing that the core PCE deflator increased at a slightly faster 0.25% m/m (or 3.0% in 1m annualised terms) and, in part due to some modest …
Africa Chart Pack (Oct. 2024) …
The Q3 RICS commercial survey painted a somewhat mixed picture of the market. There was a slight improvement in investment and capital value expectations, but rental expectations were revised down. That highlights that the road to recovery for commercial …
