The bond market sell-off over recent weeks has taken the 10-year Treasury yield to around our long-held end-2024 forecast of 4.00%. (See Chart 1.) Although significant economic, political, and geopolitical risks loom large over the coming months, we …
10th October 2024
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
Core CPI consistent with another muted gain in core PCE Although core CPI prices increased by 0.3% m/m for a second consecutive month in September, our calculations suggest that core PCE prices increased by 0.20% m/m which, at an annualised pace, is only …
The Bank of England’s Q3 Credit Conditions Survey suggests house prices will rise further in Q4 and supports our view that a mild slowdown in GDP growth this year is more likely than another recession. Despite the fall in the average quoted mortgage …
The valuations of “risky” assets continued to rise in the third quarter, both in absolute terms and relative to “safe” asset yields. We think that reflects the start of the Fed’s easing cycle and renewed optimism about the US economy after initial worries …
Prime high street rental growth in Barcelona has outpaced Madrid since late 2022. However, we think rental growth will converge in the coming years as tourism numbers fall back to pre-pandemic levels in Barcelona and stronger domestic spending prospects …
In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in …
This page has been updated with additional analysis since first publication. Core inflation below Norges Bank forecast once again Core inflation in Norway was again below Norges Bank’s forecast in September, strengthening the case for it to start cutting …
Surge in supply ahead of Budget may temporarily dampen prices A leap in the number of homes being put up for sale in September, perhaps due to fears of second-homes and rented properties being subject to higher capital gains tax after the Budget, may …
Fed split on whether to kick off with 50bp or 25bp rate cut last month The minutes of the mid-September FOMC meeting reveal that support among Fed officials for kicking off the loosening cycle with a bigger 50bp rate cut was a little weaker than the lone …
9th October 2024
Market participants have largely shrugged off the news that the US Department of Justice (DoJ) may seek a court-ordered break up of Google. Given the snail’s pace at which the US antitrust process moves at, that probably makes sense. Even so, it’s worth …
China’s economy has some cyclical spare capacity that could be filled with fiscal stimulus. But its troubles are mostly structural. The finance ministry won’t solve them on Saturday. China’s finance minister is a long way down the pecking order of Party …
Given the amount of signalling by Governing Council officials, it would be surprising if the ECB didn’t cut rates at its October meeting. But how far will the Bank go to ease monetary policy from here, and how quickly will it get there? Our Europe team …
Sweden’s economy is likely to see a strong rebound next year as consumption will benefit from fiscal stimulus and lower household interest expenditure. We think that the recovery will encourage the Riksbank to only cut its policy rate from 3.25% to 2.5% …
While electric vehicle (EV) rollouts in Europe and the US have stalled and are set to remain sluggish over the next few years, the uptake of EVs in China has surged beyond expectations. So, for all the focus on the near-term supply risks to oil, the …
War concerns drive further hawkish tilt at the BoI The communications alongside the decision by the Bank of Israel (BoI) to leave its policy rate on hold again today, at 4.50%, underline that policymakers have grown more concerned about the escalation of …
We think the Chancellor will raise taxes in line with the planned £16bn (0.6% of GDP) a year increase in public spending at the Budget on 30th October. The main influence of this will just be a rotation in the shape of GDP growth away from consumer …
Brazil inflation rises, more Selic hikes incoming The rise in Brazil’s headline inflation rate to 4.4% y/y in September was mainly due to drought-related effects on food and electricity prices but, even so, it will reinforce the hawkishness of Copom and …
Inflation ticks up again, CBE to wait until Q1 ’25 before first rate cut The second consecutive rise in Egypt’s headline inflation rate, to 26.4% y/y in September, on the back of electricity and fuel price hikes further reduces the chances of a first …
The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance to more neutral language. This …
RBI lays groundwork for December rate cut The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance …
Despite the surge in foreign visitors, Japan’s tourism industry is still struggling as domestic tourists have slashed holiday spending in the face of plunging real incomes. One of the sectors where the pandemic is still having a visible impact on Japan’s …
RBNZ hands down a dovish 50bp cut The RBNZ is likely to hand down a couple more 50bp rate cuts over the next few months . And we think it will end up cutting rates more aggressively than most are predicting. The RBNZ’s decision to cut its Official Cash …
With the inflation battle seemingly won, the Bank of Canada has indicated that it is prepared to cut interest rates more quickly if warranted, with that decision hinging on developments in business hiring, investment and consumption. While the focus on …
8th October 2024
China’s offshore equity market plunged today as the latest policy announcement from Beijing disappointed expectations. With much of the low hanging fruit (as far as valuations are concerned) now plucked, we think the bar is quite high now for further …
Boost from net trade to be offset by weaker domestic demand Despite the trade deficit widening in August, developments earlier in the quarter means that net trade looks set to support GDP growth in the third quarter. With most of that positive …
Rise in exports suggest stronger GDP growth The trade deficit narrowed to $70.4bn in August, from $78.9bn, as exports grew by 2% m/m and imports declined by 0.9% m/m. Exports, especially in real terms, were stronger than the advance goods data had implied …
Saudi Arabia’s 2025 Pre-Budget statement provided the first clear signs that officials are accepting that they need to pare back on some of their ambitious spending goals, which supports our view that non-oil GDP growth is likely to slow over the next few …
This page has been updated with additional analysis since first publication. August recovery but prospects for German industry still bleak The big increase in German industrial production in August isn’t much reason to celebrate as it was only enough to …
Inflation down again September’s drop in inflation in Sweden will reinforce the Riksbank’s inclination to keep cutting interest rates at the next few meetings. Statistics Sweden’s first ever “flash” estimate of inflation revealed that headline CPI …
With the price of crude oil continuing to climb higher, we could soon see a resurgence in fuel inflation in both Australia and New Zealand. However, if we’re right that any pickup in oil prices will prove short-lived and that second-round effects will be …
Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. While the Bank of Japan has become more concerned about a global economic slowdown, the domestic conditions would warrant …
RBA softens its tightening bias Although the RBA is becoming more attuned to downside risks to its outlook, we still think it will wait until early next year to cut rates. The minutes of the RBA’s September meeting confirmed that the RBA has in fact …
The unexpectedly strong 254,000 gain in payroll employment in September was a welcome surprise, but the deterioration in most other labour market indicators suggests this was a one-off rather than the start of a genuine renaissance. Survey-based hiring …
7th October 2024
The optimism across US equity and corporate bond markets as the labour market proves resilient makes sense to us. We think it will continue, providing a tailwind for those assets. The blockbuster US employment report for September released on Friday …
Wage growth remains strong across much of Latin America and Central Europe (CEE), and that has stalled the disinflation process in services in particular. This supports our view that, in general, central banks in these regions will keep policy tighter …
On the back of client questions, we have put together this short primer on the potential impact of a second Trump term on commercial real estate markets, both in the US and elsewhere. The key takeaway is that if Trump were to follow through on his mooted …
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The past few weeks have served as a rebuttal to those refuseniks who argue that macro doesn’t matter for markets. There have been at least three important events in which a macro understanding is essential to understand what comes next. The first has been …
This page has been updated with additional analysis since first publication. Retail data highlight weakness of consumer spending Euro-zone retail sales edged up in August but were still below their level in May. The big picture is that overall consumption …
Regular earnings growth will remain close to 3% Base pay rose the most since 1992 in August and we think it will continue to surge in the coming months. According to today’s preliminary estimate, labour cash earnings rose by 3.0 y/y in August. That result …
GDP growth in Vietnam rebounded strongly in the third quarter of the year and we expect growth to remain robust in the near term, helped by strong export demand. Data published over the weekend showed that GDP growth accelerated in the third quarter to …
This page has been updated with additional analysis since first publication. Confirmation house prices rebounded in Q3 The third consecutive monthly rise in the Halifax house price index in September provides further evidence that the falls in mortgage …
Our new House Price Leading Index combines several leading indicators that capture the balance of supply and demand in Australia’s housing market and suggests that house price growth will continue to slow over the coming months. We’ve been tracking a wide …
The strong reading on the US labour market released today has taken the 10-year Treasury yield towards our end-2024 forecast of 4%. We expect it to stay around this level, though the risks to the upside appear to have increased over recent weeks. Today's …
4th October 2024
The US dollar is on course for its best week in two years and looks to have found a near-term floor after its sharp fall in Q2. Today’s strong non-farm payrolls report (and robust ISM surveys earlier in the week), dovish signals from the ECB and the BoE, …
Home sales struggling to keep up with listings The local real estate board data released this week showed that the housing market is still struggling despite the recent fall in mortgage rates. It was positive to see sales in Toronto grow by a stronger …
September’s blockbuster employment report and the rebound in the October ISM services index mean that any hopes of another 50bp rate cut are long gone. We continue to expect the Fed to take a more measured approach from next month’s FOMC meeting onwards – …
