This Update answers some key questions on the recently agreed US-Ukraine minerals deal. In short, estimates of Ukraine’s mineral wealth seem to be overblown and the deal suggests that US support for Ukraine under Trump is likely to come with strings …
26th February 2025
Qatar’s economy will be stuck in the slow lane for much of 2025 as non-hydrocarbon activity slows and LNG output remains constrained. But the North Field will start to come online from Q4 and provide a sizeable boost to growth, which is likely to reach …
Emerging Markets Capital Flows Monitor (Feb. 2025) …
The Prime Minister’s announcement that defence spending will rise from 2.3% of GDP now to 2.5% by 2027 is likely to be only the start of a more substantial and longer-lasting increase in defence spending that could be funded by cuts to public spending …
25th February 2025
We think that there is likely to be substantial additional borrowing by European governments in the coming years to fund higher defence spending. This could amount to anything from 0.3% of GDP per year to 1.5%. Most will probably be financed nationally …
Industrial property has been a clear winner over the past five years, with double-digit annual rental growth far outpacing expectations. However, as we predicted early on, supply has been responsive and, combined with a normalisation in demand, those …
The decline in euro-zone negotiated wage growth to 4.1% in Q4 last year is likely to be followed by further large falls this year. This is because tax-free one-off wage payments which lifted German wages during 2024 will not be repeated and the …
A week spent visiting clients, policymakers and contacts in India underlines that the digital economy is thriving, that there is hope that India will not be hit hard by Trump’s tariffs, and that much-needed improvements in macroeconomic data reporting …
The Bank of Korea today cut interest rates by a further 25bps (to 2.75%) and made clear that further easing is on the way. With growth set to struggle and inflation likely to remain low, we are sticking with our view that the policy rate will be lowered …
The Australian and New Zealand dollars have fared worse than almost every other currency over the past few months. We think they will continue to do so. The US dollar has been on the back foot lately, unwinding some of its earlier Trump-era gains as US …
President Trump has signalled that he is open to the possibility of a new trade deal with China, though probably not before tensions rachet up further. This would likely involve China committing to more purchases of US goods, particularly energy, …
January’s inflation data show that domestic price pressures are strong but easing. We remain convinced that they will decline much further this year. Data released this morning confirmed that euro-zone headline inflation edged up from 2.4% in December to …
24th February 2025
Following yesterday’s federal election in Germany, this Update answers questions raised by clients in our on-line briefing (which can be viewed here ). What are the key takeaways from the election itself? The CDU’s leader, Friedrich Merz will be the next …
Euro-zone exports have performed poorly for several years and the outlook is poor even if the EU does not get into a trade war with the US. We suspect that US tariffs will be only a small additional drag, but there is a lot of uncertainty and the hit …
21st February 2025
Hotels have seen a considerable turnaround in the past five years given the near-existential threat that the pandemic posed to the sector. Having bottomed last year, we expect values will grow in the coming years, with a pick-up in consumer spending …
20th February 2025
Germany’s next government looks set to cut taxes and, if the parliamentary maths allow, reform the constitutional fiscal rule. It is also likely to be firmer in its support for Ukraine even as support from the US wanes and to advocate an increase in EU …
Whilst COMEX benchmark copper prices will be heavily influenced by President Trump’s plans for tariffs in the near term, the bigger picture is that weak demand growth and robust refined copper supply will weigh on global benchmark prices over the next few …
While our bullish year-end forecast of 7,000 for the S&P 500 assumes the index’s absolute valuation will approach its dotcom-era peak, that forecast is comparatively conservative based on relative valuation. If the equity risk premium reached its level in …
It may seem odd that tech firms are likely to make further layoffs in 2025, while at the same time being one of the leading sectors for hiring intentions. But this broadly reflects cutbacks in less profitable areas to free up capital to invest in …
19th February 2025
The Bank of Canada has downplayed the recent stronger monthly increases in its preferred CPI-trim and CPI-median core measures, but we are not convinced by the Bank’s claim that these measures are overstating underlying inflation pressures. While the GST …
South Africa’s hard activity data for December were generally disappointing but it’s still likely that the economy rebounded in Q4 of last year following a surprise contraction in Q3. We expect the recovery to continue this year and have pencilled in …
Whereas political pushback against the cost of climate action is hindering policy in North America and Europe, the tailwinds from China’s low-cost green technology exports are becoming more concentrated in emerging markets more aligned with China. The …
Saudi Arabia’s real estate sector is in the midst of a boom and affordability among Saudi citizens for housing is becoming increasingly stretched, which may tempt the authorities to loosen lending criteria in a bid to meet their Vision 2030 targets for …
Having handed down a third consecutive 50bp rate cut at its meeting today, the Reserve Bank of New Zealand is likely to slow the pace of easing going forward. That said, we still think there’s a compelling case for a lower terminal rate than most are …
Nigeria’s headline inflation rate came in at 24.5% y/y in January after the national statistics office made substantial methodological changes and, while we do not yet have the full information to predict the exact path for inflation going forward, fading …
18th February 2025
Polar vortex freezes market The plunge in the sales-to-new listings ratio in January is a downside risk to our view that house prices will recover this year, particularly amid anecdotal evidence that US tariff threats are weighing on demand. Developers …
We doubt that Donald Trump’s reciprocal tariff threat, nor his broader protectionist agenda, are priced in markets fully. We expect US Treasury yields and the dollar to edge up as these tariffs come into effect. In our view, this, alongside continued …
Five years on from start of the pandemic, one of the big economic legacies in India is the adoption of digital payments, driven by mobile apps and the Unified Payments Interface (UPI). This increased digitalisation broadens the tax base, expands lending …
Colombia’s economy strengthened at the end of last year, with GDP expanding at its fastest pace in more than two years. But the combination of tight fiscal and monetary policy, alongside lower oil prices, means that growth is likely to disappoint in 2025. …
When the Reserve Bank of Australia handed down its inaugural 25bp cut today, it indicated that any further withdrawal of monetary restriction would be limited, given residual inflationary pressures. Accordingly, we’re comfortable with our view that the …
European governments are poised to further scale up their plans for defence spending in the coming years which should benefit the equity prices of European defence companies, but the boost to GDP is likely to be small. As things stand we think the bulk of …
17th February 2025
A weaker economy than we previously thought could mean housing demand is a bit more subdued than we expect. But our forecast for mortgage rates to fall further than is widely anticipated suggests transactions will continue to recover and house prices can …
The outcomes of central bank meetings over the last few weeks underscore the point that Asia will lead the next phase of the EM monetary easing cycle this year, alongside Mexico. Meanwhile, there are a handful of EM central banks (particularly in Central …
While household incomes are rising the most since the early 1990s, households are saving rather than spending the bulk of those gains. And with real income growth set to slow this year, we expect consumption growth to remain solid rather than …
China is among a minority of countries that apply lower tariff rates on the US than vice versa, so it is not as obviously exposed to reciprocal tariffs as many others. But President Trump’s latest announcement underscores just how serious he is about …
14th February 2025
Our base case is that Treasury term premia – and yields – rise only a little further. But we think disruptive US trade policy, among other things, poses a threat to that view and, relatedly, to Treasuries’ broader use as a hedge against any downturns in …
Booming demand for housing has led to huge price rises in southern Europe over the past few years and will support rapid construction growth for some time to come. Moreover, there is little risk of a bubble forming because mortgage borrowing has been …
13th February 2025
GDP growth in Russia came in stronger than most expected last year at 4.1%, but this was accompanied by significant overheating and policymakers lost control of inflation. We think the period of rapid growth will give way to a slowdown in 2025, but the …
President Trump’s push for an early peace agreement in Ukraine raises the prospect of higher defence spending in Europe and increases the chance of a fall in European natural gas prices. But it does not dramatically shift the outlook for the European …
If the Trump administration pursues a reciprocal tariff strategy rather than a 10% universal tariff, then it could result in a smaller rise in the overall effective tariff rate than we have assumed. But while most DMs would come out relatively unscathed, …
Higher mortgage rates and weak activity starting to weigh on housing demand January’s RICS survey suggests that the recent rises in mortgage rates and the downbeat economic outlook weighed on housing demand at the start of this year. But bigger falls in …
Soaring food inflation has been the key driver behind the recent strength in headline inflation. Processed food inflation will remain high for a while yet but that won’t prevent overall food inflation from falling sharply as the surge in rice and fresh …
Any attempt by the EU to impose tariffs on imports of US services would be controversial and difficult to implement. It is more likely that the EU links regulation and domestic taxation of digital services to trade relations with the US – but probably by …
12th February 2025
Five years ago, the retail sector was staring at the abyss, as lockdowns and virus-related restrictions worsened what was already a crisis in demand. The turnaround since has been dramatic. But while the sector has now re-priced and is set to perform …
Keeping track of “cost and chaos” in metals markets …
The latest CPI data out of Central and Eastern Europe (CEE) have been stronger than expected, and leading indicators suggest that inflation across the region may be higher than we previously anticipated this year. We have revised up our interest rate …
China added five critical minerals to its export control list last week but stopped short of banning their sale. The move was intended as a warning to the Trump administration and to increase China’s leverage during future negotiations. If the US …
Prospects for Greece’s economy are brighter than for the core euro-zone economies over the next year or two, but a shortage of labour will keep growth lower than in fellow “peripheral” economies, notably Spain. It could also cause growth in Greece to slow …
A slowdown in the economy, alongside an unfavourable external environment, have contributed to declines in the Indian stock market and the rupee. We continue to expect the stock market to fall further and we now expect a further decline for the Indian …
Due to the relatively small size of the federal workforce and the large number of exempt positions, the federal government hiring freeze should have only a modest impact on payroll employment. More pain would be felt if the President follows through on …
11th February 2025
