Copom point to front-loaded tightening Investors’ expectations for Brazil’s Selic rate have shifted up even further following last week’s rate hike, but we think that they have gone too far. The analyst median forecast, published in the central bank’s …
26th March 2021
Commodities markets were something of a mixed bag this week . The grounding of a container ship in the Suez Canal helped to prop up the prices of some commodities despite growing worries over the potential hit to demand in Europe from the slow vaccine …
SA Reserve Bank nowhere near a hawkish pivot South Africa’s monetary policy stance is likely to remain accommodative for some time, going against market expectations and the projection model of the Reserve Bank (SARB). This week’s decision to keep the …
Recent global developments and the signal this week from the Bank of Canada, that it is likely to cut its asset purchases sooner than we expected, lead us to think that Canadian bond yields will rise further this year. In contrast to our expectations a …
Third waves, lockdowns and new GDP forecasts The rise in virus infections, extension of containment measures, growing headwinds to the auto sector and slow pace of vaccination means that we are revising down our GDP forecasts in Central Europe this year. …
News reports suggest President Joe Biden will unveil plans for a large infrastructure package on Wednesday. We expect the package will take much longer and be harder to pass than the $1.9trn American Rescue Plan, and the economic effects will be more …
Denmark plots a course to re-opening Sweden announced this week that it will allow vaccinations using the AstraZeneca jab to resume, albeit only for the over-65s, but both Norway and Denmark kept the temporary suspensions in place. It has not all been …
Despite the good news on economic activity, there have been few signs that this is igniting inflation just yet. So while we think the rally in 10-year gilt yields has further to go, we doubt yields will rise far. While the risk of an interruption to the …
Singapore: limited boost from latest reopening Singapore announced a further loosening of containment measures this week, but they are unlikely to provide much of a boost to the economy. The country looks on the verge of eradicating COVID-19. There has …
Economy to tread water in H1 The PMI data for March released this week were better than expected, with the headline euro-zone index rising above 50 for the first time in six months. What’s more, not only did the PMIs and German Ifo surveys suggest that …
PBOC may stop short of formalizing tighter policy We had expected the PBOC to start hiking its policy rates this quarter given the strong economic backdrop. By the end of last year, output had rebounded well above trend and while headline y/y inflation …
Shifting our focus from Nikkei to TOPIX Despite upward revisions to our long-term US Treasury yield forecasts this week, we’ve generally left our upbeat forecasts for DM equities unchanged (see here ). And we still expect the outperformance of Japanese …
More moves to slow house price growth We’ve expressed doubts over the ability of the RBNZ’s loan-to-value ratio (LVR) limits which were implemented at the start of the month to slow the pace of house price growth very much. (See here .) The government …
Bad debts set to pile up The Supreme Court this week lifted its ban on banks classifying delinquent loans as non-performing, reversing a measure that was introduced seven months ago. This is the last of the significant extra-ordinary banking sector …
Oman more proactive with austerity than Bahrain Recent developments have highlighted the contrasting efforts of Bahrain and Oman in addressing their fragile public finances and placing balance of payments positions on a more sustainable footing. In both …
25th March 2021
Nigeria lying in economic bed policymakers made The past week has brought further evidence that Nigeria is suffering from stagflation and we suspect it’s a ‘chronic condition’ arising from poor policy choices rather than an ‘acute disease’. Price …
19th March 2021
Colombia: investment grade rating in the balance A tax reform bill in Colombia, that will be sent to Congress next week, has slipped under the radar but this legislation could have a major bearing on the country’s sovereign investment grade rating. This …
Commodities markets experienced a bit of a reality check this week, with prices falling despite little material change in the underlying demand and supply fundamentals . In the same way that optimism about demand pushed up oil prices in recent months, …
The Fed made clear this week that it still has no plans to raise interest rates within the next three years. But that apparently rests on the belief that the strongest economic growth in nearly 40 years will generate almost no lasting inflationary …
US-Russia relations reach a new low Comments from US President Joe Biden this week threatening to take a tougher stance against Russia have raised the prospect of tighter US sanctions that could deal a significant blow to Russian markets. Mr. Biden’s …
While the government hinted this week that the vaccination program could be completed before the target of September, the threat of vaccine nationalism elsewhere means that, with Canada reliant on foreign production, efforts could still be derailed. …
Decoupling is Made in China too The acrimonious meeting in Alaska underlines that a new US administration has not led to a reset of US-China relations. China’s government had apparently hoped that some Trump-era sanctions might be rolled back as a …
At first glance the further rise in 10-year gilt yields to a 15-month high of 0.82% this week seems odd when on Thursday the Bank of England’s Monetary Policy Committee (MPC) showed no signs of moving closer to raising interest rates. Admittedly, the MPC …
Norges Bank’s Intentions (4,4): RATE HIKE The Norges Bank’s decision to leave its policy rate on hold at zero this week was never really in doubt. However, as we expected, policymakers shifted to a more hawkish stance and prepared the ground for the start …
While the ECB promised last week that it would make “significantly higher” bond purchases over the coming quarter, there has been little evidence so far that the weekly pace of purchases has accelerated. The latest data showed that the ECB made net …
Labour market blip in Korea reverses The sharp drop in Korean unemployment last month suggests that the economy is bouncing back following a fall in COVID-19 infections and the easing of containment measures. The unemployment rate fell to 4.0%, more than …
Sharp fall in unemployment Australian employment surged in February despite brief localised lockdowns in some states. The 88,700 rise was enough to pull down the unemployment rate from 6.4% to 5.8%. That’s just 0.6 ppts higher than the pre-virus level and …
Persistent rise in infections could dent the recovery New daily COVID-19 cases in India have been rising over recent weeks, and on Thursday reached their highest level since early December. For now at least, this doesn’t appear to be a major threat to the …
Inoculations will gather more pace Many initial concerns over Japan’s vaccine rollout centred on supply constraints. Japan has been entirely reliant on imports of the Pfizer vaccine in the early stages of its rollout. However, supply hasn’t been an issue …
Lebanon’s crisis deepens The long-running crisis in Lebanon hit a fresh low this week as the currency collapsed and the government scaled back subsidies. With the formation of a new government nowhere in sight, the crisis shows no signs of turning around …
18th March 2021
Brazil’s fiscal discipline wavering Events over the past week have raised fresh concerns that Brazil’s public debt will be put on an unsustainable path, suggesting that sovereign bond yields could rise further. Yesterday, Brazil’s congress approved a …
12th March 2021
The Bank of Canada looks set to upgrade its GDP forecasts in April, but we would be surprised if it turned much more hawkish with regards to policy. The Bank delivered a reasonably upbeat statement alongside its decision to keep its policy rate at 0.25% …
Despite big moves in bond and equity markets, commodity markets were fairly subdued this week . Nevertheless, we expect oil prices to break higher again before long, and our new forecasts show them peaking in Q3 (compared to Q4 previously) . Meanwhile, we …
Sub-Saharan Africa back to bond markets African policymakers seem to be turning increasingly to international bond markets to finance budget deficits this year. Last November, Côte d’Ivoire became the first country in Sub-Saharan Africa to issue sovereign …
BoE to hold firm At its meeting on Thursday the European Central Bank (ECB) struck a decidedly dovish tone by announcing that it will step up its bond purchases to “prevent a tightening in financial conditions”. (See here .) After all, yields on Italian …
Discussion now turns to infrastructure package With President Joe Biden having signed the $1.9trn American Rescue Plan into law, the discussion will now move on to the American Recovery Plan, the complementary package that will focus on longer-term …
Turkey’s current account on an improving trend Current account figures out of Turkey this week were a bit worse than expected but the underlying trend suggests that the economy is rebalancing. This, coming alongside a further interest rate hike next week, …
After weeks of indecision the ECB pledged yesterday to make “significantly higher” bond purchases in the coming quarter. (See here .) As weekly purchases since New Year have averaged €14bn, anything less than €20bn would, in our view, not be …
Oh no, not more ECB QE! The SNB would have been forgiven for being a bit perturbed by the dovish message from the ECB yesterday that it expects the pace of its asset purchases to be “significantly higher” in the coming quarter. After all, the prospect of …
Cutting our forecasts for the Philippines We are lowering our 2021 GDP growth forecast for the Philippines due to the worsening virus situation and the recent deterioration in the economic data. The 7-day average of new infections has risen to its highest …
The National People’s Congress ended yesterday. From an economic perspective, the key outcomes were the budget and policy targets for 2021 which we discussed here and the Five-Year Plan, which we’ll publish a Focus on shortly. (We’re also holding a …
More resilient to external shocks since Fukushima Yesterday marked 10 years since the meltdown at Fukushima Daiichi nuclear power station. The triple blow from the earthquake, tsunami and nuclear meltdown on 11 th March 2011 caused a devastating loss of …
RBA defends yield target The sell-off in government bond markets in recent weeks resulted in a deterioration in liquidity conditions, with bid-ask spreads reaching the highest level since last year’s panic. (See Chart 1.) The Bank responded last Monday by …
Rate hikes still a long way off Financial markets appear increasingly convinced that the RBI is on the cusp of fairly aggressive monetary tightening. A cumulative 100bp increase in interest rates this year is now being discounted, with the first rate hike …
Attacks on Saudi oil facilities still present risk The recent attacks directed at Saudi oil infrastructure pushed up global oil prices earlier this week and highlighted the lingering risk to the economic outlook from such incidents. On Sunday, the Houthi …
11th March 2021
SA: Easing lockdown to lift stranded economic boat Improving virus numbers allowed South Africa to ease containment measures this week, which is likely to inject much-needed momentum into the recovery. As of 1 st March, South Africa moved from lockdown …
5th March 2021
One of the most striking developments since the pandemic has been the surge in residential investment. The fourth-quarter national accounts, which this week showed a stronger-than-expected 9.7% annualised gain in GDP (see here ), also revealed that …
It was a relatively two-sided affair in commodities markets this week. On the one hand, oil prices rose on the back of greater-than-expected output restraint announced by OPEC+. And on the other hand, a partial unwinding of investor optimism weighed on …
The sell-off in Treasuries continued this week, as Fed officials signalled that they are not overly concerned by rising yields and the Senate closed in on passing President Joe Biden’s $1.9trn fiscal package. The latter reinforces our view that both GDP …
Amlo’s electricity roll-back a warning sign The Mexican government’s bill to partly reverse reforms encouraging private participation in the electricity sector threatens to open up a Pandora’s box of legal wrangling and will further damage the prospects …
